Communities and Local Government

• Local government
• Local government finance
• Council taxes in England
• Council Tax: Frequently asked questions

Local government

Council Tax: The Facts

Your questions answered about Council Tax 

What is Council Tax?

Council tax is a local tax, based on the value of your property, raised by local authorities to help pay for local services.

What does Council Tax pay for?

Council tax raises about £25bn (gross of council tax benefit) and provides part of the money that is required  to provide the services that our local communities need, for example policing, fire services,  providing support to the elderly and vulnerable, the maintenance of parks and open spaces, getting rid of our rubbish and keeping our streets clean.

What does central government contribute?

Not all the money that is needed by local councils is raised through council tax. Central government is providing local councils in England with over £70b in 2008/2009 (an increase of 4.0 per cent from 2007/2008), to enable them to deliver all the services that we expect. This total includes specific and general grants and non-domestic rates. In dividing this up between councils, the government takes account of the number and values of the properties in each area and how much it costs to provide services there.  A guide to how the local government finance settlement works can be found at www.local.communities.gov.uk/finance/0607/simpguid.pdf (external link).

The Government has recently announced the first ever three year settlement for local government in England. By 2010/2011 the settlement will provide a 45 per cent real terms increase since 1997 in Government funding for local authorities.  

How are Council Tax bills set?

Local authorities are responsible for setting council tax bills in the light of their budget for the year, but the Government has powers to cap excessive increases. Capping action has been instigated against eight authorities in 2008/2009.  We are pleased that the average increase in bills has fallen significantly in recent years, down to 4.0 per cent in 2008/2009. More details can be found at www.local.communities.gov.uk/finance/ctax/ctax078.pdf (external link).

How does the value of my property affect my bill?

Local authorities decide the total amount of council tax they want to raise. The rules for deciding how that amount is then raised from individual properties are set out in legislation. Properties in England are placed in one of eight bands, from A to H depending on what the property would have sold for in April 1991. The council tax on a Band A property will always be one-third of the Council tax on a Band H property and the council tax rises in set proportions through the bands in between. Your bill will therefore depend both on which band your property is in and decisions by the council on overall spending levels. The average council tax bill per dwelling in 2008/2009 is £1,146. You can find more details of the levels of council tax for 2008/09 at www.local.communities.gov.uk/finance/ctax/ctax078.pdf (external link).

The Valuation Office Agency (VOA) , which is part of Her Majesty's Revenue and Customs, is responsible for allocating a council tax banding to all homes in England, maintaining the council tax valuation lists and dealing with queries. You can find more information on how council tax bands are allocated and you can check the banding of your property, on the VOA website at www.voa.gov.uk (external link).

There has been a lot of misleading and inaccurate press reporting about council tax and valuation issues. The VOA has guidance on its website setting the record straight.  You can find this at www.voa.gov.uk/TheFacts/council-tax-facts.htm (external link). In brief, the Government has made it clear that there will not be a revaluation during the lifetime of this Parliament and no revaluation is expected to be considered until after 2010/2011.

How do my personal circumstances affect my bill?

Council tax bills do not just take into account the value of your property; they also take account of the circumstances of the residents through a system of discounts and exemptions. So, for example, if you are living alone you will be entitled to 25 per cent off your bill, if you are a full time student you will not have to pay council tax or if you are living with and caring for someone who is not a family member you will not be counted for council tax purposes. If you'd like to know more about discounts, exemptions and paying your bill, then our leaflet at www.local.communities.gov.uk/finance/ctax/ctaxbillguide.pdf  (external link) will help you.

How can I get help with my Council Tax bill?

If you are on a low income you may be entitled to council tax benefit which can cover up to 100 per cent of your council tax bill. The Directgov website: www.direct.gov.uk/ (external link, search for council tax benefit) provides a useful guide on whether you may be eligible and if you think you may be then you should get in touch with your local authority. You can find their phone number and address in the business numbers section of the phone book.

What does the future hold?

In his Inquiry into Local Government, Sir Michael Lyons concluded that the council tax system should be retained. The Government supports that conclusion and has no plans to change the system. As Sir Michael confirmed, there is a strong economic case for retaining a local property tax and council tax itself has a number of significant practical advantages. For example, its yield is predictable and stable and it is relatively easy to collect; because properties, unlike people, cannot disappear. It also strongly reinforces the accountability of local authorities to their communities, and helps provide a link between the tax people pay and the benefits they take from local services.

The evidence from the Lyons Inquiry also showed that revaluation would not have a significant impact on the fairness of council tax relative to income. It would, however, cause significant disruption for individuals and families.  Sir Michael's analysis indicated that more than four million properties could go up by at least one band. The Government will therefore stand by its commitment not to revalue during the lifetime of this Parliament and no revaluation is expected to be considered until after 2010/2011. Even at this point there would need to be clear benefits given the costs to households that could be involved.