It is becoming more and more popular for people to be renting out their spare rooms to lodgers. Many people who rent out these rooms however are not aware of the Council Tax implications which can arise from taking in a lodger and renting out spare rooms.
Sole or main residence, lodgers and renting out a room
When renting out a room the initial consideration in determining if there’s any effect on the Council Tax charge is as to whether the lodger has their ‘sole or main residence’ in the property or if they have their ‘sole or main residence’ in a different property.
‘Sole or main residence’ is a key Council Tax concept. A simple guide to ‘sole or main residence’ would be to consider the place where an outside observer would say the lodger was resident if they looked at their overall situation.
If the lodger is found to have their ‘sole or main residence’ in the property then they are most likely to be taken in to account as being resident in the spare room for Council Tax purposes. This means that, unless the lodger can be disregarded (e.g. they are a full-time student), any discounts or exemptions received are likely to be reduced.
If the lodger does not have their ‘sole or main residence’ in the property then they will most likely not be taken in to account as being resident in the spare room for Council Tax purposes – in this case the lodger should have a property elsewhere which is their ‘sole or main residence’ (e.g. someone who lodges at a property during the week whilst working away). This situation is quite common and discounts are often removed (wrongly) because of it – see our case study.
Council Tax is calculated on a daily basis
Council Tax is determined on a ‘daily basis’ so the circumstances must be looked at in respect of each day the lodger will be resident – what applies for their circumstances on one day may not apply for the next day.
S2 of the Local Government Finance Act 1992
“Liability to pay council tax shall be determined on a daily basis.”
Will a lodger affect the Council Tax Charge ?
Whether or not the Council Tax charge is affected depends on the existing residents of the property, any discounts or reductions already in place and whether the lodger has their ‘sole or main residence‘ within the property.
If the lodger is found to have their ‘sole or main residence’ within the property then they will be taken in to account for Council Tax purposes. Any discounts or reductions which are in place may need to be adjusted or removed.
If the lodger is not found to have their ‘sole or main residence’ within the property then they will not be taken in to account for Council Tax purposes.
Who pays the Council Tax Charge for a lodger ?
A lodger in a spare room is not personally liable for the Council Tax charge under s6 of the Local Government Finance Act 1992. The resident landlord remains responsible for the Council Tax charge which is due and ensuring it is paid. Any terms agreed by the landlord regarding payment cannot make the lodger liable for the Council Tax payments, it would be purely a contractual agreement between the landlord and lodger.
What if my lodger is only here temporarily ?
There is no specific concept of temporary for Council Tax purposes. The situation on each individual day must be considered. If the lodger has their ‘sole or main residence’ in the property, even if for only one day, they must be taken account of for that day.
Informing the Local Authority about your lodger
Regardless of the situation in which the lodger becomes resident in a property it is the liable person who has the responsibility to ensure that the local authority is kept updated. This includes anything which may increase or decrease eligibility to a discount or exemption.
Failure to keep a local authority updated may result in a fraud investigation if an unknown name comes up during verification checks. If the local authority request information from you then you may additionally incur a penalty of up to £280 per time.
Good quality help with your Council Tax dispute can be hard to come across – there’s a lack of independent, expert, places where you can get the help you need however LGFA92’s specialist Council Tax paralegal advisor is here to change that.
Contact us today. Email us at firstname.lastname@example.org, Call our Council Tax helpline on 0191 6451118.
This website is solely the view of LGFA92, the Council Tax specialists , based on our interpretation of legislation. Your local authority is free to dispute this view. A binding decision may require the intervention of a valuation tribunal.