Why am I paying an empty homes premium on my council tax?

Some owners of empty properties are now charged higher amounts of council tax. This has become known as the ‘empty homes premium’. How does this premium work and when will the charge apply?

What is the empty homes premium?

The council tax system in England, Scotland and Wales allows district and unitary councils to charge higher rates of council tax on properties that have been “unoccupied and substantially unfurnished” for certain periods of time. The aim of this is to encourage owners to bring empty properties back into use.

This provision dates from 2013 in England and Scotland and 2017 in Wales. Further legislation was passed in 2018 in England extending the maximum additional charges. (Council tax does not operate in Northern Ireland.)

The law sets a maximum charge that a council can make. For instance, after a property has been “unoccupied and substantially unfurnished” for two years, an authority in England can charge up to 200% of the normal council tax bill (see the Table below).

The amount of the empty homes premium is based on the normal council tax band of the property. The band itself is not affected by the empty homes premium.

The ‘reset period’

When a property is reoccupied, the premium is no longer payable. However, if the property becomes empty again before the ‘reset period’ has elapsed, the premium will apply again immediately. If the property is reoccupied for longer than the reset period, a further two-year period (one year in Scotland and Wales) will have to elapse before a premium can be charged again. This is to prevent people from occupying a property for, say, a few days in order to have the premium disapplied, then moving out again.

How do the rules on council tax premiums differ across Great Britain?

When might you have to pay the premium?

There are some scenarios in which homeowners may face an empty homes premium when they do not expect to.

Acquiring an empty property you intend to live in

If you have bought a property that has already been empty for two years or more (one year in Scotland and Wales) and you do not immediately occupy it, you may have to pay the premium. Liability for the premium depends on how long the property has been empty: a change in ownership does not ‘reset the clock’. As soon as you move into the property, the premium will cease to apply.

Liability for a council tax premium will not appear on the normal legal searches that are conducted when purchasing a property.

Acquiring an empty property you intend to sell

If you have bought, or inherited, a property and you have not been able to sell it within two years of its becoming empty, you may have to pay the premium. In Scottish legislation and in Welsh legislation, the period is one year, but demonstrable attempts to sell or let the property will exempt it from an empty homes premium for up to one additional year. This exemption does not apply in England.

Receiving an unrelated council tax exemption

An empty homes premium is payable two years (one year in Scotland and Wales) after a property becomes empty, not two years after another council tax exemption ends.

For instance, if you have inherited a property from a relative who has died, you may have benefited from a class F council tax exemption (related to probate on the relative’s estate). But when that exemption no longer applied, an empty homes premium would become payable two years (in England; one year in Scotland and Wales) after the property originally became empty.

When does an empty homes premium not apply?

In England, an empty homes premium cannot be charged if:

• The property that had attracted a premium is let out. The tenant will then become liable for council tax payments. The premium will cease to apply because the property is no longer empty.
• The property is empty because the owner has to live in armed forces accommodation for job-related purposes.
• The property is an annexe that is being used as part of the main property (annexes will often have a council tax band of their own).

Guidance from the Scottish Government (PDF) and guidance from the Welsh Government (PDF) on other circumstances in which a premium cannot be charged is also available.

An empty homes premium is payable by the owner of the property. The buyer of a property cannot become liable for a premium that was due before they bought the property.

Second homes and holiday homes

The Levelling Up and Regeneration Bill 2022–23 would change the two-year limit in England to one year.

This Bill would also introduce a power to set an empty homes premium to “substantially furnished” properties that have no permanent resident. This would cover properties that are used as second homes by their owners (though the term ‘second homes’ does not appear in council tax legislation).

The existing powers can only be applied to properties that are “unoccupied and substantially unfurnished”. There is no statutory definition of this phrase, but the courts have taken it to signify a property that was not furnished enough to be habitable.

This new ‘second homes premium’ could be set at up to 200% of the normal rate of council tax. The Bill does not mention a period of the time for which a property must have had no permanent resident. Power to introduce a ‘second homes premium’ has been in place in Wales since 2017 (PDF).

A billing authority wishing to use this power must give 12 months’ notice before it first uses it. This means that this power will not come into effect until the 2025/26 financial year at the earliest. However, when the new power does come into effect, it is possible that many holiday homes will immediately become liable for increased rates of council tax.

Correction

On 22.08.23 we made a correction to this Insight clarifying that the premium does not apply when the property is empty because the owner has to live in armed forces accommodation for job-related purposes. It previously implied this was the case if the owner had to live elsewhere for job-related purposes.

About the author: Mark Sandford is a researcher at the House of Commons Library, specialising in local government and devolution in England.

Photo by Luke Thornton on Unsplash