Avoiding the £2,800 Mistake: Who Pays Council Tax in an HMO?

Let me tell you a quick story that’ll save you a headache - and potentially thousands of pounds.

Years ago, I (Steve) owned a property in Lewisham. It was let out room-by-room - technically an HMO - and I assumed, like many landlords do, that the tenants were responsible for council tax.

Fast forward a few years…
The tenants had moved out.
The council came knocking.
And I got hit with a £2,800 bill.

Why?
Because in certain HMOs, the landlord is legally responsible for council tax - no matter what the tenancy agreement says.

So before you start listing your rooms, let’s clear this up.

Quick Answer: In most HMOs, the landlord pays the council tax - not the tenants.

But why?

The Council Tax (Liability for Owners) Regulations 1992 says that in certain types of accommodation, the owner is responsible - not the occupier.

These types include:

• Properties let by the room
  
  
• Properties with individual tenancy agreements
  
  
• HMOs where tenants share kitchens or bathrooms but rent separately
  
  

So if your tenants aren’t on one joint tenancy (like in a student house), then you’re the one on the hook.

Even if your contract says otherwise.

When do tenants pay council tax in an HMO?

There are rare cases when the tenants are responsible:

• If they’re on a joint tenancy agreement
  
  
• If they rent the whole property together
  
  
• If the property isn’t classed as an HMO under council definitions
  
  

But in 90% of room-by-room lets? It’s your bill.

What if they don’t pay… and you find out later?

You still have to pay. Councils can backdate charges and come after you for unpaid tax - even if the tenants already moved out.

That’s exactly what happened to me in Lewisham.

I learned the hard way. Now you don’t have to.

What to do instead:

1. Take full responsibility for council tax from the start
   
   
   • Build it into your rent model
     
     
   • Avoid disputes, back payments, and confusion
     
     
2. If you’re renting to students, check if they’re exempt
   
   
   • Full-time students don’t pay council tax
     
     
   • But YOU still need to apply for the exemption - it’s not automatic
     
     
3. Use this checklist before renting rooms:
   
   
   • Are you letting by the room?  = Yes
     
     
   • Are they on separate agreements? = Yes
     
     
   • Do they share facilities? = Yes
      

 = You’re responsible

How do you make HMOs profitable if you’re covering council tax?

Easy. You budget for it.

Here’s what Steve recommends:

• Calculate your full monthly running costs, including council tax, utilities, cleaning and Wi-Fi
  
  
• Add at least a 20% margin for profit
  
  
• Then divide that by the number of rooms to set rent
  
  

Done right, you’ll still earn far more than a standard buy-to-let - even with all bills included.

Want to avoid more hidden HMO traps like this?

Join the Free Masterclass with Steve Doran

• See real case studies (including my own mistakes)
• Learn how to structure rents, manage bills and stay compliant
• Ask questions live – no sales pitch, just practical help

👉 Claim your free spot now

Final thought:

HMOs aren’t hard - but they are regulated.

If you don’t know the rules, you could lose thousands without even realising it.

So here’s your takeaway:

Don’t assume. Don’t copy what other landlords do. Learn the law, get the facts, and treat your HMO like a business.

That one shift alone can save you a fortune.