What is council tax and how much is it going up?
- Published
Council tax bills are set to rise for millions of households in England, Scotland and Wales in April.
The government is increasing the amount of money it gives to councils in England in 2025-26.
But the Local Government Association says council finances remain "extremely challenging", and warned there could be further cuts to services.
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.
Typically, 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% reduction, external.
Properties occupied only by students are exempt.
Some discounts are available if you - or someone you live with - has a disability, external.
Most people pay in 10 monthly instalments from April onwards, and then pay nothing in February and March.
Northern Ireland uses a domestic rates system, external instead of council tax.
How much are council tax bills going up in April?
Councils in England with responsibility for delivering social care can increase council tax every year by up to 4.99% without triggering a referendum, or local vote. Smaller councils without social care duties can increase bills by up to 2.99%.
For 2025-26, the government is letting six areas bypass the 4.99% cap.
Bradford Council will be allowed a 10% increase, while Newham and Windsor and Maidenhead can both implement a 9% rise.
Birmingham, Somerset and Trafford can put bills up by 7.5%.
Several councils were not given permission to impose larger increases, including Hampshire, which had asked for a 15% rise.
Most other councils have yet to set out their full plans for 2025-26, but the County Councils Network predicts that 93% of its members will introduce the maximum permitted increase, external in April 2025.
In April 2024, the average increase for a band D property in England was £106, external, which took the average bill to £2,171.
Council tax rates in Scotland have been frozen or had limited increases since 2007, but they are expected to go up in April, in some cases by as much as 10%.
The country's 32 councils have warned they faced a potential shortfall of £392m in 2025-26 - which could rise to £780m the following year.
The Scottish government says it is offering local authorities an extra £1bn in 2025-26 to help reduce the scale of any rise.
Council tax rates in Wales are also expected to rise in April. Wales' 22 local authorities were given £253m by Welsh ministers in December's draft budget, but council leaders said more money is needed.
The Welsh Local Government Association previously estimated that councils were facing a £560m funding gap.
How is council tax calculated?
How much you pay depends on your property's council tax band. 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 in 1991, while in Wales the base year is 2003. Northern Ireland's system uses 2005 prices.
You can check your home's band in:
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 work.
Some cities with mayors, such as London and Manchester, can also add a separate levy that covers funding other services.
The Northern Ireland Assembly has proposed changing its domestic rate system to increase the amount paid by higher value homes from April 2025.
What does council tax pay for?
Council tax funds local services, including:
rubbish collection
street lighting
libraries
police and fire services
youth clubs
parks and recreation facilities
care services
Council tax helps to fund local services such as playgrounds
Analysis by the Local Government Association (LGA) found that increased demand and rising costs meant 61% of council spending in 2023-24 went on children's services and adult social care, external - up from 52% in 2013-14.
This has reduced the amount of money available for other services.
Where else do councils get their money?
About half of local authority funding comes from council tax,, external according to the Institute for Government (IFG).
Councils in England can also raise some income by charging for services including parking, swimming pools, planning applications, and from commercial investments.
Most of the rest comes from a combination of business rates and central government grants.
Labour has promised £2bn of central government funding for English councils in the year from April 2025, an extra £700m on top of the £1.3bn announced in October's Budget.
But £515m of that has already been earmarked to offset the rise in employers' National Insurance (NI) contributions which also takes effect in April.
Separately, the government is consulting on directing more money to deprived councils in England from 2026, as part of a wider shake-up of council financing.
According to the IFG, central government funding for local authorities in England fell by 10.2% between 2009-10 and 2021-22, external.
At the same time, councils have had to deal with inflation, higher energy costs and increases to the National Living Wage.
What happens when a council goes 'bankrupt'?
Councils cannot technically go bankrupt, but if they cannot balance the budget for the financial year, they can issue what is called a section 114 notice., external
This means they cannot commit to most new spending, and residents could see cuts to services, such as reducing the number of bin collections or dimming streetlights.
Before 2018, only two councils had issued a section 114. Twelve have been issued since, external.
Birmingham City Council went bust in 2023, with a £760m black hole. It followed Woking Council, Thurrock and Croydon (for the third time).
Research by the LGA in 2024 found that one in four English councils said they were in danger of going bust in 2025-26 or 2026-27, external.
A number of authorities in England have not issued section 114 notices but are receiving so-called "exceptional financial support", external to help manage their budgets.
Middlesbrough Council, for example, is one of 19 authorities that was given permission to borrow money to fund day-to-day spending in 2024-25.
What happens if you cannot pay your council tax?
Do not just stop paying - councils may take legal action to reclaim the money.
Instead, contact the council and explain the situation, Citizens Advice suggests., external
You might be able to pay less council tax or not pay it at all depending on your circumstances.