What is council tax, how much is it going up by and how is it calculated?

3 weeks ago 17

Young woman opening front door with keyImage source, Getty Images/Tang Ming Tung

By Tom Edgington & Lauren Potts

BBC News

Millions of households in England are expected to see their council tax bills rise in April.

Council charges are also expected to rise in Wales and Northern Ireland, but in Scotland they are frozen until 2025.

What is council tax and who pays it?

Council tax is a compulsory charge on properties in England, Scotland and Wales. It is set by local authorities to raise money for providing services.

As a rule of thumb, anyone who is over 18 and owns or rents a home has to pay council tax.

However, there are some exemptions and discounts.

Someone living alone, for example, is entitled to a 25% discount.

Properties occupied only by students are exempt.

Most people pay in 10 monthly instalments then don't pay anything in February and March.

Northern Ireland uses a domestic rating system instead of council tax.

How much is my council tax bill going up by?

In England, councils with social care duties can raise council tax by up to 4.99%, without triggering a referendum. Others can increase it by up to 2.99%.

In April, 75% of councils are expected to introduce the maximum increase, according to the County Councils Network, a local government organisation.

Last year, this meant an average £99 increase for band D properties in England, taking bills to £2,065 a year.

Councils can impose a hike of more than 5% if they have government permission.

In April, Birmingham and Woking are allowed to raise council tax by up to 10%, while Thurrock and Slough can put bills up 8%. All have effectively declared themselves bankrupt.

How is council tax calculated?

How much you pay depends on what council tax band your property is in. The more expensive the property, the higher the band.

In England and Scotland, bands are based on the price the property would have sold for on 1 April 1991, and in Wales it is 1 April 2003. Northern Ireland's system uses 2005 prices.

You can check which band you home is in:

Where does my council tax money go?

Council tax is a major source of income for most councils. It helps fund numerous services, including:

  • rubbish collection
  • street lighting
  • libraries
  • police and fire services
  • youth clubs
  • parks and recreation facilities

Council tax bills also include additional charges - called levies - which pay for other services.

One goes towards the cost of care homes and other adult social care services. Another is set by local police and fire authorities to help fund their services.

Some cities with mayors, such as London and Manchester, can also add a separate levy that covers funding various services.

Where else do councils get their money?

Most of the rest comes from a mix of business rates and central government grants.

Other sources of income include charges for services like parking and swimming pools, planning applications and commercial investments.

Options such as introducing a tourism tax or a local income tax have also been explored.

What happens when a council goes 'bankrupt'?

Councils don't technically go bankrupt but if they can't balance the budget for the financial year, they can issue what's called a section 114 notice.

This means they can't commit to most new spending and residents will possibly see cuts to services.

Before 2018, only two councils had issued a section 114. Since then, there have been more than 10 such notices.

Image source, Getty Images

Image caption,

Council tax helps to fund local services, including playgrounds

Birmingham City Council went bust in 2023, with a £760m black hole. It followed Woking Council, Thurrock and Croydon (for a third time).

The Local Government Association said in October that councils in England face a £4bn funding gap over the next two years.

What happens if you can't pay your council tax?

Don't just stop paying - councils many take legal action to reclaim the money.

You might be able to pay less council tax or not pay it at all depending on your circumstances.

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