HMO Council Tax: How Are Shared Houses Banded?

New legislation from December 2023 means most Houses in Multiple Occupation (HMOs) in England and Wales should now have a single council tax valuation. This change ends the inconsistent practice of 'disaggregation', where individual rooms were given separate council tax bands, often leading to higher total bills.

What has changed for HMO council tax?

Before 1 December 2023, the Valuation Office Agency (VOA) could treat each room or floor in an HMO as a separate dwelling for council tax purposes. This process, known as disaggregation, was inconsistently applied and could lead to large and unpredictable increases in a property's total council tax bill. Following a government consultation, new regulations were introduced to ensure most HMOs are valued as a single property with one council tax bill.

The primary aim was to create greater certainty for landlords and tenants. Under the new rules, the landlord is typically liable for paying the single council tax bill for the entire HMO. This applies whether the property is let on a single joint tenancy or to individual tenants renting separate rooms.

How does the VOA band an HMO now?

The Valuation Office Agency assesses HMOs based on a 'whole property' approach. Instead of looking at individual rooms, they now determine a single council tax band for the entire building. The VOA has been proactively reviewing licensed HMOs that were previously disaggregated to merge them back into a single valuation.

However, there are exceptions. If a unit within a larger property is a fully self-contained flat, with its own kitchen, bathroom and entrance, it may still be given its own separate council tax band. The key distinction is whether tenants share basic facilities. Properties with shared kitchens or bathrooms are now almost always assessed as a single dwelling.

Who is liable for the council tax bill in an HMO?

The Council Tax (Liability for Owners) Regulations 1992 specifies that for an HMO, the owner (landlord) is the liable person for council tax, not the tenants. This legal responsibility overrides any clause in a tenancy agreement that attempts to pass the liability to tenants. Landlords usually factor this cost into the rent they charge.

The only common situation where tenants are liable is if they rent an entire property together on a single joint tenancy agreement. In this case, the property is treated like any standard rental, and the tenants are jointly responsible for the council tax bill.

What if an HMO is still banded incorrectly?

If you own or live in an HMO and believe it is still incorrectly banded—for example, if rooms are still valued separately despite sharing facilities—you can challenge the valuation. The first step is to submit a challenge, known as a proposal, to the Valuation Office Agency.

Landlords of unlicensed HMOs that were previously disaggregated may need to be proactive and contact the VOA themselves to request a review. The process requires providing evidence about the property's layout and how it is occupied.

If the VOA rejects your challenge, you have the right to appeal to the independent Valuation Tribunal for England or Valuation Tribunal for Wales. These tribunals are independent judicial bodies that hear appeals against VOA decisions and local council liability rulings.

How does this affect landlords and tenants?

The 2023 rule change provides much-needed consistency. For landlords, it means a more predictable cost base, as the risk of a sudden, sharp increase in council tax from disaggregation has been removed. They remain liable for the bill in most HMOs and must budget for this.

For tenants, it removes the worry of being unexpectedly hit with an individual council tax bill for their room. Where properties are re-banded from multiple units to a single one, the total tax payable is often lower, which can help keep rents competitive. However, tenants in HMOs are generally not able to apply for Council Tax Reduction, as they are not the liable person.