Council tax set to increase by nearly 5% across the UK!
- TBA
- Mar 19
- 5 min read
Updated: Mar 21
As the tax increases from the Labour Party's Autumn Budget gradually come into effect, changes to Council tax, which directly affect households, have largely been finalised.
Among the 139 upper-tier local authorities in England that have proposed or confirmed tax increases, 85% plan to set the increase at the default maximum of 4.99% from April.
For most areas in London, the 4.99% increase includes an additional £95.01 for Council tax and an extra £18.98 levied by the London Mayor.
Under normal circumstances, local authorities must hold a local referendum to gain residents' approval if they wish to increase Council tax by 5% or more.
However, six areas have applied for special permission and received Treasury approval for further increases:
Bradford: 9.9%
Birmingham: 7.49%
Newham, London: 8.99%
Somerset: 7.5%
Trafford, Greater Manchester: 7.49%
Windsor and Maidenhead: 8.99%
The Resolution Foundation think tank reports that the lowest-income fifth of UK households spent 4.8% of their income on Council tax in the 2020-21 financial year.
Overall, lower-income households tend to allocate three times the proportion of their income (4.8%) to Council tax compared to the wealthiest fifth (1.5%).
How is council tax calculated?
Council tax in the UK is collected by local authorities to fund public services such as waste management, social care, and the maintenance of public facilities. While Council tax is typically calculated annually, most local authorities allow instalment payments, meaning you can choose to pay monthly, quarterly, or by other agreed methods.
Key factors in council tax calculation
1. Valuation Band
Properties are categorised into valuation bands based on their market value. Each band has a corresponding tax rate, ranging from Band A (lowest value) to Band H (highest value).
In England, the valuation bands are as follows:
(Image source: GOV.UK)
2. Tax Amount Calculation
The specific council tax amount is determined by your local authority, meaning rates may vary between different areas. Each valuation band has a designated tax amount, which the local authority uses to calculate your bill.
For example, if the Band D council tax in your area is £1,500 and your home is classified as Band D, you will need to pay £1,500. If your home falls under Band A, the tax amount will typically be lower.
3. Discounts and exemptions
You may be eligible for a discount or exemption in certain circumstances, including:
Single Person Discount: A 25% discount applies if only one adult resides in the property.
Student Exemption: Properties occupied solely by full-time students are entirely exempt from Council tax.
Low-Income Households: You may qualify for Council tax Reduction (CTR) if you are on a low income or receiving benefits.
Special Hardship Relief: If you are experiencing financial hardship due to reasons such as long-term illness or unemployment, you can apply for further reductions.
Does council tax always increase?
Since council tax is a key revenue source for local councils to fund public services, factors such as inflation and rising costs often result in annual increases.
However, it is not always a one-way increase. In some cases, your property may be reassessed and placed in a different valuation band, leading to a change in your tax amount.
Situations that may lead to reassessment include:
Partial demolition of the property without rebuilding
Conversion of a property into two or more separate units (e.g., an annex), each with its own valuation band
Splitting a single property into multiple flats
Merging multiple flats into a single property
Starting or ceasing to work from home
Structural modifications by a previous owner
Significant changes in the local area, such as new roads being built
A general revaluation of properties in the area
What if your Council tax bill is incorrect?
Council tax bills are usually issued between March and April each year, depending on your local authority. The bill outlines the amount payable for the new financial year (starting 1 April). Most councils send these bills by late March to allow residents time to arrange payment.
If you recently purchased a property or moved into a new home, you may receive a temporary bill covering only the remaining months of the financial year.
If you believe your council tax bill has been sent to the wrong person, contains an incorrect amount, or if you are entitled to a discount or exemption but have not received it, you can appeal the bill. However, if your only reason for appeal is that you find the bill too high, your appeal will not be accepted.
You should write to your local authority explaining the reason for your appeal. A response is typically provided within two months. If your appeal is successful, a revised bill will be issued. However, you must continue paying your current bill until the new one arrives. If your appeal is rejected, the council should explain the reasoning behind their decision.
What happens if you miss a council tax payment?
If you miss a payment, your local authority will send a reminder notice, giving you seven days to make the payment. If you fail to pay within this period, you will be required to pay the full annual council tax amount. If you miss another payment, a second reminder will be sent.
Each financial year (1 April – 31 March), you can receive a maximum of two reminder notices. If you miss a third payment, the council will issue a final notice requiring full payment of the year's tax. If you do not pay within seven days, the council may take legal action, including applying to the local court for a liability order to recover the debt.
If you still fail to pay, the council may instruct your employer to deduct the unpaid amount directly from your wages.
In extreme cases, some local authorities have taken non-payers to court. Courts will assess whether you have the means to pay but have refused to do so, or if you genuinely cannot afford the payments.
If the court determines that you have no valid reason for non-payment and you refuse to pay, you could face up to three months in prison. However, if you owe money, you may be able to negotiate a repayment plan with the council.
Some Advice from TB Accountants
As an annual tax that must be paid, the rise in council tax will increase living costs for homeowners and tenants alike. Although landlords typically cover this tax, they may pass on the additional costs to tenants in certain situations.
TBA UK has 16 years of experience in tax management and is dedicated to providing practical tax planning and savings strategies to help you reduce your tax burden and optimise your financial management for long-term wealth growth.
Whether you need assistance with personal tax matters or are looking for more efficient business financial solutions, our team of professional tax accountants offers tailored services.
