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New HMO Tax Changes: How Investors Can Benefit from the Review of Council Tax Valuation.

The world of property investment is constantly evolving, and the Department for Levelling Up, Housing, and Communities (DLUHC) is keen on creating a more predictable and consistent environment for property investors in the UK. One such change is the council tax valuation of Houses in Multiple Occupations (HMOs), a topic that has been the subject of much discussion and debate in recent years. In this blog post, we'll delve into the key highlights from the "Council Tax Valuation of HMOs: Summary of Consultation Responses and Government Response" and explain how these changes may impact property investors in the UK.



Summary of Responses

The consultation received a total of 563 responses, reflecting the wide range of stakeholders interested in this issue. Landlords, tenants, local authorities, and trade bodies all had their say. The overwhelming consensus was that the current system of assessing HMOs for council tax is unfair. This has led to confusion and uncertainty among landlords and tenants, discouraging property improvement and modernization.


Local authorities, however, offered mixed opinions, with some arguing that unaggregated HMOs are unfair to tenants and landlords, but others asserting that the existing approach aligns with policy intentions.

The consultation also examined the definition of HMOs, exceptional circumstances, and other related aspects. While opinions varied on the details, the need for consistency across planning, licensing, and building regulations was widely supported.

Government Response

The government has recognized the concerns raised by the consultation and aims to create a framework that ensures all HMOs are treated as a single property for council tax purposes. By doing so, they intend to provide clarity and consistency, reduce administrative burdens for councils, and ensure that council tax liability remains with the landlord rather than shifting to individual tenants. The Valuation Office Agency has estimated that only a small proportion of HMOs are currently not aggregated into one property.

To implement these changes, the government will amend existing legislation, including the Council Tax (Chargeable Dwellings) Order 1992 and related regulations, to ensure HMOs are valued as a single property for council tax. This will apply to all HMOs, both licensed and unlicensed.

The definition of HMOs for council tax valuation purposes will be based on the well-established definition set out in the Housing Act 2004. This will ensure consistency and fairness across the board. Self-contained properties and converted blocks of flats, which are already well-defined, will be excluded from these changes.


In terms of implementation, the Valuation Office Agency will work with councils to proactively identify licensed HMOs that haven't been aggregated and re-band affected properties within two months of the legislation coming into effect. For unlicensed HMOs, landlords or tenants can submit a proposal to re-band affected properties, and the VOA will have a statutory four-month deadline to respond.



Next Steps

The government intends to lay regulations later this year, with the policy change taking effect before the end of 2023. These changes aim to bring clarity, consistency, and fairness to the council tax valuation of HMOs, ultimately creating a more attractive environment for property investors in the UK.

In conclusion, these changes are significant for property investors considering HMOs. They offer a more stable and predictable environment, which should encourage investment, property improvement, and modernization. Investors should stay informed and be prepared to adapt to these upcoming changes to make the most of their HMO investments. For more information or questions, please contact council.tax@levellingup.gov.uk.


These changes have the potential to unlock opportunities in the HMO market, ensuring a more equitable system for all parties involved and contributing to the growth of the UK property investment landscape.

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