Bills and council tax in rental properties: who pays what?

One of the most common practical questions in any tenancy is who is responsible for which bills. The answer depends on what the tenancy agreement specifies, the type of tenancy, and in the case of council tax, specific rules about who is considered liable under the Local Government Finance Act 1992.

Who pays council tax in a rental property?

In most residential tenancies, the tenant is liable for council tax. The council tax payer is the person who has the legal right to occupy the property as their main or only home, which in a standard tenancy is the tenant rather than the landlord. The tenant's name should be registered with the local authority, and they are responsible for paying the bill throughout their occupation.

However, the landlord becomes liable for council tax in two specific circumstances.

During a void period, when the property is empty between tenancies, the landlord is the person with the legal right to occupy and is therefore liable. Many local authorities offer a short exemption or discount for the first period of a void (often one to three months depending on the council), after which the full council tax rate applies. Landlords should factor this into their void period cost calculations. Council tax paid during a void period is an allowable expense for income tax purposes.

In an HMO where the property is let by the room and tenants each have individual tenancy agreements for their room rather than a joint tenancy covering the whole property, the landlord rather than the tenants is typically liable for council tax, because there is no single qualifying occupier with a joint right to the whole property. The landlord usually recovers this cost through the room rent. HMO landlords should confirm the position with their local authority as rules can vary, and include council tax costs in their yield calculations.

Are bills included in rent?

Whether utilities and other bills are included in the rent depends entirely on what the tenancy agreement specifies. There is no legal requirement for bills to be included, the default in most standard private residential tenancies is that the tenant is responsible for utilities (gas, electricity, water) and council tax in addition to the rent.

All-inclusive or bills-included tenancies, where the rent covers some or all utilities and council tax, are more common in HMOs, student accommodation, and some professional house shares. They simplify the tenant's monthly outgoings and can make a property more attractive to certain tenant profiles. The all-inclusive rent arrangement must be clearly set out in the tenancy agreement, specifying exactly which costs are covered and any fair usage policies that apply.

From a landlord's perspective, all-inclusive arrangements add complexity and risk. If energy prices rise significantly, the landlord absorbs the increase rather than the tenant. High-usage tenants can erode the margin significantly. Many landlords using all-inclusive arrangements cap usage at a reasonable level and charge excess consumption above the cap, which needs to be structured carefully to comply with the energy billing regulations and permitted payments rules.

Which bills is a tenant responsible for?

In a standard tenancy where bills are not included, the tenant is responsible for:

• Council tax — registered in their name with the local authority from the day the tenancy starts.

• Gas and electricity — the tenant should contact the suppliers and register in their name from the start of the tenancy. At the start, take meter readings and provide these to the tenant, noting them in the check-in report. At the end, take readings again and provide them in the check-out report.

• Water rates — in most of England, water rates are billed to the occupier. The tenant registers with the water company.

• TV licence — the tenant's responsibility where a TV or BBC iPlayer is used.

• Broadband and telephone — the tenant's choice and responsibility.

Which bills remains the landlord's responsibility?

Even where bills are not included in the rent, some costs always remain the landlord's responsibility. Service charges and ground rent on leasehold properties are payable by the landlord as the freeholder's counterparty, not the tenant. Buildings insurance is the landlord's obligation, not the tenant's (though tenants should have their own contents insurance). Safety certificate costs, gas safety, EICR, EPC, are always the landlord's responsibility.

What happens if a tenant does not pay bills?

If a tenant fails to pay utility bills or council tax, the liability remains with the registered occupier, the tenant, and cannot transfer to the landlord. However, unpaid council tax during a tenancy can cause administrative complications when the void period begins, as the local authority may have incorrect records. Landlords should notify the local authority promptly when a tenancy ends and a new one begins, providing the new tenant's details where possible.

For all-inclusive tenancies, the landlord's liability for the bills remains even if the tenant's rent is not being paid. This is another reason why rent guarantee insurance is worth considering for all-inclusive HMO arrangements.

See our complete guide to allowable expenses for landlords for the full list of costs a landlord can deduct from rental income for tax purposes, and our rental income tax calculator to model your taxable profit after expenses.

Also see: Allowable expenses · Void periods · All-inclusive rent · HMO · Tenancy agreement · Check-in report · Permitted payments · Rent guarantee insurance · Service charge · Ground rent

Disclaimer: This article is intended for general informational purposes only and does not constitute legal, financial, or professional advice. Landlord and tenant law is subject to change, and the information in this article reflects the position at the time of writing. You should always seek independent legal or professional advice before taking any action in relation to your property or tenancy.