What is council tax, how much has it gone up, and how is it calculated?
- Published
Council tax bills have gone up for millions of households in England and Wales.
Large increases set by local authorities came into force on 1 April. Many have also slashed services in an effort to balance their books.
How much is my council tax bill going up by?
Councils with social care duties can raise council tax every year by up to 4.99%, without triggering a referendum. Others can increase it by up to 2.99%.
The County Councils Network previously predicted that 75% of councils would introduce the maximum increase in April 2024.
The average increase for a band D property in England for 2024-2025 will be £106, taking bills up to £2,171, external. The average rise in April 2023 was £99, external.
Councils can increase bills by more than 5% without a referendum if they have government permission.
Birmingham City Council, for example, has approved an increase of 21% over the next two years, as it tries to make savings of £300m.
Woking Borough Council agreed an increase of 10%. Thurrock put bills up by 8%, while Sough approved an 8.5% rise. All have effectively declared themselves bankrupt.
In Wales, a 12% council tax rise was approved for Pembrokeshire.
Council charges also rose in Northern Ireland. However, 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.
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.
And there are some discounts if you, or someone you live with, has a disability, external.
Most people pay in 10 monthly instalments and then don't pay anything in February and March.
Northern Ireland uses a domestic rating system, external instead of council tax.
How is council tax calculated?
How much you pay depends on the 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 in 1991, and in Wales it is 2003. Northern Ireland's system uses 2005 prices.
You can check which band your 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 helps to fund local services such as playgrounds
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?
Councils in England can raise some income by charging for services like parking, swimming pools, planning applications and from commercial investments.
But about half of local authority funding comes from council tax, external, the Institute for Government says.
Most of the rest comes from a mix of business rates and central government grants.
By the 2024-25 financial year, councils will have seen a 27% fall in spending power for local services since 2010, external, according to the Local Government Association (LGA).
It says cuts in central government grants, rising inflation, higher energy costs and increases to the National Living Wage are all factors.
Nottingham City Council said reduced government funding was one of the reasons it had to approve hundreds of job losses and cut social care and youth services.
Its leader David Mellen told the BBC £100m had been taken from its budget "each and every year in the last 10 years", external.
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, external.
This means they can't 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. Since then, there have been more than 10 such notices
One in five English councils say that it is in danger of going bankrupt, according to the LGA.
A number of authorities in England have not issued section 114 notices but are receiving exceptional financial support, external to manage financial pressures.
Middlesbrough Council, for example, is one of 19 authorities that has permission to borrow money to fund day-to-day spending in 2024-25.
Birmingham City Council went bust in 2023, with a £760m black hole. It followed Woking Council, Thurrock and Croydon (for a third time).
What happens if you can't pay your council tax?
Don't 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.