Will Rising Council Tax Mean Tenants Expect Lower Rents as 9 out of 10 Local Authorities Increase Bills?
As a landlord, in almost all cases you should expect the tenant of your property to pay the council tax. This is something we all have to face, whether we own our homes or rent them.
Council tax in the UK is a local taxation system levied on domestic property. It was introduced in 1993, replacing the very unpopular Community Charge, known as Poll Tax. Every property is assigned one of eight bands, from A to H based on property value.
The tax is used to pay for local amenities and services, such as rubbish collection, police and fire services.
What’s happening to council tax in Norfolk?
In Norfolk, the council tax for an average band D property was £1,190 a year in 2016-17. However, this is set to rise to £1,247 next year. Which means that if you rent a home, on top of the monthly rent, you’ll need to find another £57, in a band D property. This is an increase of around 4.8% (of which around 1.8% is a council tax rise and 3% is for the Adult Social Care).
A rise of almost 5% on an already high council tax could stretch the finances of some people and may have an impact on rental values. Certainly council tax becomes an issue for renters when looking for property with many preferring to go for lower band properties.
Should investors be worried?
So this is something that investors should think about when calculating rental yields and having to pay for vacant properties. Especially when considering that nine out of ten local councils have just raised council tax. Only 22 of the 353 local authorities have frozen rates and just one, East Hampshire, was able to reduce it.
The large rise has come because this is the first time councils are allowed to add the Adult Social Care precept of 3%. Although this will raise around £208m over the coming year, this is a drop in the ocean in overall spending and is something that also comes out of national insurance payments.
At the moment, the rise is having only a minimal impact on landlords and tenants. However, if using council tax to fund more public services becomes the norm then you can expect to see more increases year on year which will only put further strain on tenant’s who may already be struggling to meet their financial commitments.
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