What is Council Tax and How is it Calculated?

Local government structures in the United Kingdon, which include civil parishes, local authorities, and regional authorities, play a very important part in the maintenance, enhancement and monitoring of services provided to their residents and users. Action by local government institutions impacts a wide variety of sectors and services, from physical infrastructure to social/civil programmes. A key source of funding for local authorities is council tax, which is tax tied to the value of a domestic property that all property owners (and sometimes renters) must pay. In 2019-2020, local authorities received 52% of their funding from council tax.

It is important to note that council tax only applies to residences, while commercial spaces (shops, offices, pubs, etc.) that use a space pay a business rate, which is a tax also set by local authorities.

In England your council tax band is calculated based on the property’s size, layout, character, location, change in use, and the value of the property on the 1st April 1991 (1st April 2003 in Wales). They are put into 8 bands (A-H). The bands are assessed and calculated by the Valuation Office Agency (VOA), which is a government institution under HM Revenues and Customs, but the rate at which each band is taxed is set by local authorities. Each local authorities sets its own council tax rates and also has the power to increase or decrease it as they see fit to fulfil its duties. That said, depending on the rate of increase, it may require a referendum. The valuation bands set by the VOA are as follows:

Your council tax rate is determined by your local authority, and the charge for Band A is always 1/3 of the charge for Band H. Note that the council tax rate set by a local authority is a fixed value, different for each band. For example, if two properties are of different value but both set in Band C, they will be taxed the same fixed council tax rate. Only the VOA is allowed to change the band of a property, and it conducts regular assessments to check if any properties require a change of band.

Council Tax Discounts, Exemptions and Premiums

In addition to setting rates, local authorities also have the power to set different rates and conditions for council tax discounts and exemptions. These include but are not limited to: student and apprentice discounts, carer and care worker discounts, and child benefits discounts on council tax. Additionally, local authorities also set conditions for council tax premiums (this is sometimes the case for empty properties or second homes, for example).

Council Tax and the Private Rental Sector

If you are a private renter, your landlord is responsible for making sure council tax on the property is collected by the local authority. That being said, you, as a tenant, may be financially responsible for providing part or all of the cost of that council tax through your rent. We advise that you read your rental agreement thoroughly and make sure to ask how the rent is broken down and what bills and taxes it includes. But what you should definitely keep in mind is that your personal and banking details are not those that should be used by the council for tax collection purposes, rather it is the details of the landlord who owns the property. (We need to check this part, just to make sure it’s correct on a legal basis)

What about the Greater London Authority?

In the Greater London Area, residents actually pay tax to two local government bodies: their relevant local authority (the Borough), and the Greater London Authority (GLA). This is because the GLA also provides and maintains key services and infrastructure that fulfil the needs and expectations of the London as a whole. These include the duties of the Metropolitan Police and Transport for London (TfL). This special tax dedicated to the GLA is called a ‘GLA precept’ and it is a portion of the council tax collected by local authorities. For more information on the GLA precept and how it support the GLA in fulfilling their responsibilities to Londoners, we recommend you check the Mayor’s Budget.

What’s the Paperwork Related to Council Tax and is it Standardised Across all Authorities?

As each local authority indepently sets its own rates for council tax, as well as its conditions and requirements for council tax premiums, exemptions and discounts, it is sadly not possible for us to provide you with a standardised template related to council tax issues (such as forms for registration, applications for exemption of discount, or any council tax appeals) that would contain information that is relevant and shared by all local authorities. Additionally, some local authorities still rely on traditional physical forms that are expected to be filled and submitted, while others have gone fully digital.

We recommend that you investigate the specific webpage of the local authority that concerns you and learn more about how they evaluate, collect and assess council tax. If you wish to contact or visit the website of the local authority you reside in, but do not know which local authority it is, we recommend that you use this link and plug in your post code. The page will inform you of which local authority is responsible for your area and provide a link to their official website.

While local government institutions may not share a unified approach to council tax, you at least now have answers to some pretty important questions: