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Changes to council tax – will this affect UK property investment?

Council tax changes on UK property investmentWe’ve recently had a few rental properties come up empty and some of them, admittedly, do require a full refurbishment. 1970’s faux wood panelling just doesn’t cut it anymore! We followed the usual standard procedure of notifying the gas, electricity and water suppliers of the end of tenancy in addition to letting the council know that the tenant has left the property. This is where we got a mild shock and (yet again) tasted the utter exasperation of dealing with councils. Up until the 1st of April 2013, a property could be empty for up to 6 months of the year at a zero rate of council tax. Further to this, landlords and those involved in UK property investment could qualify for a further 50% deduction of council tax for another 6 months. This was all based on the property being empty, unfurnished and uninhabitable.

However, the councils have decided to top up their coffers and bulk up their pension pots by changing this policy on the 1st of April 2013. Now, it is a 1 month zero rate exemption, followed by a 25% deduction for the months after. We just cannot see how this is fair or justified for landlords that are genuinely looking to provide good quality rental accommodation to private tenants. We now have less than 30 days to get all the works done, get it marketed and tenanted. It’s just not going to happen and it seems the councils just do not care.

Why have the changes come into effect?

The councils argue that as part of the Governments strategy to bring empty homes into use, the Government is making changes to the council tax scheme in respect of empty properties and second homes. We can see how this argument makes sense in places where foreign owners have bought up high value residential estate and left it sat empty e.g. expensive apartments in central London. However, we cannot see how this supports the vast majority of landlords across the UK who would look to provide a genuine service in the private rented sector. It seems that this change is being enforced by every single council without exemption, but the rates do vary somewhat from council to council so please check with your local council tax office as to where they stand.

What would be a more acceptable change?

In our opinion, we could just about understand it if the six months were reduced to three, but the reduce it to one month is wholly inappropriate and will pull more landlords closer to bankruptcy and will mean a lesser quality of rental accommodation as landlords hurry and cut corners to get the property rented as soon as possible.

We have notified our clients of this and have provided them with ways of making sure they can minimise their council tax liabilities in a legal manner. If you are a new client looking to invest in any of the properties that we promote, please feel free to bring this up in discussion and we’ll be happy to discuss how we can help you in this and other less than interesting aspects of UK property investment! Please sign up to our newsletter to be kept notified of any other changes.

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