ECONOMY
‘Council tax on my buy-to-let has quadrupled to £7,000’

Hundreds of thousands of landlords could see their council tax bills quadruple in a stealth tax raid which has seen rental properties be reclassified to generate more tax.

Many large rental homes, which are let room by room to tenants, are being revalued so they are now considered as multiple smaller dwellings for council tax purposes, rather than one home with several tenants. In a five-bedroom property this means five sets of council tax will be due.

Revaluations have centred on areas with the highest number of rental homes and experts said this suggested councils were seeking to reclassify properties to increase their income.

Penny Mourdaunt, minister of trade and Portsmouth North MP, criticised the wave of revaluations and called on the Government to intervene to prevent housing supply being harmed.

“This is a growing problem and it is arbitrary. It is stopping homes being built because developers’ business models become unviable,” she said.

Government figures show there are 500,000 of these so-called “houses in multiple occupation” in England that could be affected.  Campaigners said they were inundated with calls from worried landlords.

Ian Fletcher, of the British Property Federation, an industry body said: “Local authority budgets have been squeezed for more than a decade, so they need ways of getting more money. There is only one way this will go and that is up.”

What is an HMO© Provided by The Telegraph What is an HMO

With these tenancies, landlords typically pay bills and council tax on behalf of tenants and then pass on a single monthly charge to renters. If council tax rises, landlords must absorb the cost or pass it on to tenants in the form of higher rents.

Daryn Brewer, 43, is a landlord and developer in Portsmouth. The city is in the top 20 local authorities in the country for large rental properties.

He rents a six-bedroom property to tenants but the Valuation Office Agency told him it had been classified as six separate dwellings. This meant the total council tax bill for the property quadrupled from £1,821 to £7,287.

“This looks like the poll tax. It’s an absolute mess,” Mr Brewer said.

Councils do not classify properties for tax purposes themselves. But Chris Daniel, a housing consultant, warned that cash-strapped councils were able to refer HMOs to the Valuation Office to be reclassified as multiple properties.

Calli Robertson, 47, is a landlord with 15 properties in Peterborough. The council tax bill on one of her five-bedroom homes quadrupled from £1,300 per year to £4,890. It was reclassified as five one-bed homes, even though three of the bedrooms did not have en-suite bathrooms and none had kitchen facilities, she said.

The council tax jump meant that Mrs Robertson needed to raise the rent on the cheapest room by 23pc.

Alan Murdie, of Council Tax Legal Services, a specialist consultancy, said: “Cases are shooting up.”

Mr Murdie said there had been particular spikes in east and west London, Coventry and Birmingham. These areas all have high proportions of rental homes let out room by room.

Wendy Whitaker-Large, a landlord and campaigner, said: “A year and a half ago, I was getting calls about this every few months. Now it’s two or three times a week. It’s about to blow up.”

In some cases similar properties on the same street had been classified differently for council tax purposes.

Ms Whitaker-Large said: “It completely destroys the market and puts landlords at a massive disadvantage. Some landlords think they must foot the bill or the tenants will leave.”

She said one landlord in Hertfordshire declared bankruptcy after his two 12-bedroom properties were reclassified.

A spokesman for the Valuation Office, which is part of HM Revenue & Customs, said that its approach to large rental homes had not changed. “The amount of tax any assessment will yield is not a consideration,” he said.

Have you been affected by council tax disaggregation? Please get in touch, [email protected]

Source: Telegraph.co.uk

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