Can I avoid paying council tax on an empty property?

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, it is subject to change and we are not responsible for any errors or omissions.

For many British expats, it is common to have a property back in the UK. Often, the property will be rented out (e.g. on a Buy to Let or “lease to let” basis), providing an income to cover the mortgage, pay for maintenance/admin costs and, hopefully, generate a small profit. However, owning property in this way can bring complications, especially regarding tax.

As financial planners in Murcia helping British nationals and other expats, one question we sometimes receive is about Council Tax. In particular: “Can I avoid paying Council Tax on an empty property?” Other questions might concern capital gains tax (CGT) if an expat is thinking about selling their UK property.

Below, we explain how Council Tax works in 2024-25 and what a British expat’s (likely) responsibilities are regarding taxation. We hope these insights are useful. If you want to discuss your financial plan with a member of our team in Murcia, please get in touch to arrange a no-obligation financial consultation at our expense:

+34 966 460 407
info@scottsdale.eu

Do I have to pay Council Tax on a UK property?

As a quick reminder, Council Tax is a local tax in the UK that councils (and other types of local authority) levy to pay for local services, such as roads and street lighting.

As a general rule, anyone who owns or rents a UK home will need to pay Council Tax on the property they reside in. Here, expats might think they are exempt. After all, they are not living in their property. They are based overseas. Not so fast!

Most British people living overseas will need to pay Council Tax on their UK properties. This is generally true even if you are classed as “non resident” for tax purposes.

So, if you own a Buy to Let in the UK and are letting it out to tenants whilst living abroad, you most likely need to pay Council Tax. Sorry to be the bringer of bad news!

What if my UK property is empty?

Getting an exemption from Council Tax is difficult. The list of “disregarded people” is quite small and specific. For instance, someone with a “severe mental impairment” or on a “low income” might get an exemption or discount (if others are living in the property).

If you own an empty “second home” as an expat, there can be niche cases where a local council decides to give someone a Council Tax reduction during an application. It will be up to the local authority to judge each case.

Please note, however, that the “direction of travel” across the UK in 2024 is that local authorities seem to be leaning towards stricter taxation of second homes. A case in point is Cornwall, where the Cornwall Council will introduce a 100% extra Council Tax premium on second homes starting in April 2025.

In short, it may be worthwhile for certain expats to apply for a Council Tax discount if their UK property is empty. However, keep your hopes and expectations in check. Rather, it may be more worthwhile thinking about how to maximise your property as an investment – e.g. maximising profits by generating income and lowering monthly costs, such as the mortgage.

Bear in mind that certain local council may charge UK owners more if their properties are unoccupied for a significant period. Brent Council, for example, says it will add a 100% additional Council Tax premium after 1 year of unoccupany. After 10 years, this rise to 300%.

Navigating property taxes as a UK expat

British expats need to be aware that simply moving abroad does not remove all tax liabilities on their UK properties. Two notable taxes to be aware of are capital gains tax (CGT) and inheritance tax (IHT).

Normally, someone living in the UK does not pay CGT on their home if they sell it for more than the original purchase price (e.g. when moving house). This is called Private Residence Relief.

However, as a British expat you will likely be regarded as no longer resident in your UK property – especially if you let it out. As such, selling your property whilst overseas is likely to result in a CGT charge.

Relocating overseas does not make a British expat immune from IHT in the UK. In 2024-25, a British expat who dies will pay IHT on their UK-based assets (e.g. Buy to Lets) even if they are “non-domiciled”, provided their total value exceeds the standard “nil-rate band” (currently £325,000).

As you can see, owning property as a British expat is complex from a tax perspective! Yet there is much that can be done to optimise a financial plan, helping you to protect your interests and progress towards your long-term goals whilst living abroad. We’d love to discuss your options with you if you are ready to speak with an expat financial adviser here at Scottsdale.

Invitation

If you are interested in discussing your own financial plan or inheritance tax strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:

+34 966 460 407
info@scottsdale.eu

 

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