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HMRC internal manual

Inheritance Tax Manual

Liabilities: investigating liabilities: Council Tax

The Local Government Finance Act 1992 introduced the council tax for chargeable dwellings with effect from 1 April 1993. There was no change to non-domestic rates. Council tax is a tax on dwellings rather than on people. It is based on the ‘capital value’ of the relevant building as at 1 April 1991.

Unlike the community charge, there will be only one Council Tax bill for each dwelling. The persons liable for the bill are set out below, in descending order. A non-resident owner is the person of last resort.

  • a resident freeholder/resident owner (Scotland)
  • a resident leaseholder (including an assured tenant under the Housing Act 1988)/resident tenant (Scotland)
  • a resident statutory or secure tenant (England and Scotland)
  • a resident licensee/sub-tenant (Scotland)
  • a resident
  • the owner.

The owner will be also be liable when there are no residents and when the dwelling falls into one of the prescribed classes of chargeable dwellings detailed for the purposes of S8(1) of the Act by the Council Tax (Liability for Owners) Regulations 1992 (England). Details of these classes can be found on the Internet at

The full council tax bill assumes that there are two adults living in a dwelling. It will be reduced by

  • 25%, if only one adult lives in a dwelling as their main home, and
  • 50% if the dwelling is no-one’s main home. This may include empty dwellings and second homes.

Certain categories of unoccupied dwelling are wholly exempt. For example, property which forms part of the estate of a deceased person will be wholly exempt for up to six months from the date of the grant of probate. After this the administrator or executor will be liable.

In addition, certain categories of adults are disregarded for the purposes of the Council Tax. These include students, people lacking capacity under the Mental Capacity Act 2005, and members of religious communities (residences of ministers of religion are exempt).

Regulations provided by the Council Tax (Administration and Enforcement) Regulations 1992 provide for the payment by the executors or administrators of any outstanding liability and for the refund to them of any overpayment that may have been made.

Normally, the assessment for the general rate or Council Tax in respect of a property is for the whole of the financial year. But where an occupier or owner stops occupying or owning the property before the end of that period, they may recover any amount overpaid from the rating or billing authority.

In practice, difficulties can arise for many reasons. One deceased will have paid the full rate in their lifetime, whilst others will be in arrears or paying by instalments. Personal representatives are unlikely, in practice, to get refunds of Council Tax or Rates paid for the whole of the period from the date of death or to avoid entirely the payment of any charges that are unpaid at the date of death.

Council Tax does not apply to property in Northern Ireland. These are still subject to rates.