Don’t let the government bully you – take charge of your asset instead
There are an estimated 200,000 empty properties across the UK, worth more than £40 billion in total. In Chelsea and Kensington alone, the London borough where the Grenfell tragedy occurred, there is thought to be 1,500 empty properties. In the recent 2017 Autumn Budget, Chancellor Philip Hammond announced a measure aimed at encouraging owners of these properties to either let them or sell them.
In this article, you’ll learn what this may mean to you, and how to avoid paying the new 100% council tax premium on empty properties.
What is the council tax premium?
The premium simply means an extra charge. What Hammond has done is doubled the amount that local authorities can already charge to owners of empty properties. They have been able to charge this since 2013, at a rate of 50% of the council tax. Now that rate is 100%, effectively meaning that an owner of an empty property might have to pay double the council tax.
What is an empty property?
The definition of an empty property is left to some interpretation by the local authorities. However, it must:
- be ‘substantially unfurnished’; and
- have been unoccupied for at least two years.
If the property has been furnished or occupied for periods of six weeks or less during a two-year period, the property will still be considered to have been empty.
Exemptions to the two-year-empty rule
Of course, as with many rules, there are exemptions. For example, if you are a member of the armed forces, the two-year-empty rule does not apply. Other exemptions include:
- An annexe that is empty
- The property of someone in prison (unless the jail sentence is for no payment of council tax)
- The property of a person who is now in a care home or hospital
- A derelict property
- A property that has been repossessed or bought under a compulsory purchase order (to be demolished)
Why is the Chancellor increasing the council tax premium on empty homes now?
In reality, this is a political move. It sounds good. How Philip Hammond announced, it gave the game away. He wants to be seen to be doing the right thing, and that is to clamp down on investors buying properties and leaving them empty when there is a housing shortage in the UK. He said:
“I want to address the issue of empty properties. It cannot be right to leave the property empty when so many are desperate for a place to live. So, we will legislate to give local authorities the power to charge a 100% council tax premium.”
Will it have the desired effect?
There’s a big question mark over whether this extra charge will have the effect hoped for. Will foreign investors suddenly rush to let or sell their properties because they are now facing an extra £1,000 to £2,000 council tax each year? Many experts don’t believe so.
However, there are many people who own second homes by the coast or in the countryside. They use them for holidays, or otherwise sporadically. These owners may be hit by the extra premium. They may be forced to sell an asset they don’t want to, and to pay capital gains tax on the profits.
How you can avoid the new 100% council tax premium on empty properties
For local authorities, it doesn’t make sense to have heaps of empty homes on their patch. Especially as they have an expensive homelessness problem.
Empty properties can become eyesores, encourage anti-social behaviours such as graffiti and vandalism, and tempt people to become squatters. All of which could (and probably will) harm the value of your property and cost you money in maintenance and repairs.
Whether you’re a foreign investor or a UK resident with a second home, an empty property is a wasted resource that is becoming more expensive to hold.
If you don’t want to sell an asset that’s appreciating in value and don’t fancy being stung with a doubling of the council tax charged on it, then there is another option: let it out. You could be making money from your property, instead of having to dig ever deeper into your pocket to subsidize it.
Benefitting from our investment property management services, many of our landlord clients are making money from an investment property or second home that they no longer use. Such properties are up to hundreds (or even thousands) of miles away. Being a profitable landlord could be easier than you think.
Contact one of the Ezytrac team today on +44 1522 503 717, and we’ll help you decide on what you should do with your properties. Don’t let the government bully you into paying more money unnecessarily. Take charge of your assets today.