Council tax
Encyclopedia
Council Tax is the system of local taxation used in England
, Scotland
and Wales
to part fund the services provided by local government in each country. (In Northern Ireland
, the form of local taxation is rates
.) It was introduced in 1993 by the Local Government Finance Act 1992
, as a successor to the unpopular Community Charge
. The basis for the tax is residential property, with discounts for single people.
As of 2011, the average annual levy on a property in England was £1,196.
, i.e. the lowest tier of local government aside from parishes and communities.
These all set their precepts independently. Each of the levying authorities sets a precept (total amount) to be collected for households in their area. This is then divided by the number of nominal Band D properties in the authority's area (county, district, national park, etc.) to reach the Band D amount.
However, a large shift of properties between bands will cause a shift in the allocation of the charge between bands, and the tax levied for each particular band will then drop, as the total amount collected will remain the same for each authority (see 'calculation of amount' above). Between the wholesale revaluations, a major change to a property (such as an extension, or some major blight causing loss of value) can trigger a revaluation to a new estimate of the value the property would have reached if sold in 1991. If such a change would result in an increase in value, then re-banding will only take effect when the property is sold or otherwise transferred.
In Wales
, the bands were re-set on 1 April 2005 by the National Assembly for Wales
, based on 2003 valuations. In addition to revising the band boundaries upwards, an extra band was added.
In Scotland
, the current bands are
A full list of rates for England are available from Communities and Local Government. Council tax banding information is available from the Valuation Office Agency. A search facility combining these two datasets is available at mycounciltax.org.uk.
to both administer the council tax benefit system, and to cover payments. There may be further modifiers in certain circumstances, for example a discount for unoccupied property, a 25% discount for single occupants, or a total dispensation for diplomatic residences and residences completely occupied by students.
The highlighted descriptions indicate when a property can be occupied by certain people as opposed to the unhighlighted ones where the property must have no people living there at all.
grants and from business rates
which are collected centrally and redistributed to local authorities.
Local government provide services such as police, fire, recycling, refuse collection and removal, schools, leisure centres, park and ride schemes, parks and open spaces, street cleaning, subsidising of public transport, tourism, museums, social housing grants, housing and council tax benefits, environmental health and food safety in pubs, restaurants and shops, planning services, support for voluntary groups, meals on wheels, facilities for young people, adapting homes for disabled people, play centres for children, cctv installation, sports facilities, issuing taxi licences, flood defences, and many others.
A significant proportion of local government services are stipulated by central government in the form of statutory provision. Local councils are obliged by law to provide these services. The remainder of services are discretionary and are determined by the local council.
Critics also claim that Council Tax has a disproportionate impact on renters, or those occupying part-owned social housing. They are paying tax according to the value of a property that they may not have been able to afford to buy or even rent at market rate.
Equally, the tax isn't actually particularly proportionate even to property values. A band H property will pay at most three times as a band A, even though the value of the property may be ten or more times higher.
Whilst the tax may have regressive characteristics, supporters point out that there is a significant means tested benefit regime in place which offers rebates to those on low incomes. This has the effect of making the tax less regressive. Furthermore, in comparison to its predecessor - the Community Charge - council tax is straightforward to collect with in year collection rates averaging 97% in England.
The Liberal Democrats
have proposed a system of local income tax to replace Council Tax, but when such a scheme, the Scottish Service Tax
, was proposed for Scotland, they opposed it. Critics of that suggestion have claimed that administering such a system independently of the national tax system would impose significant costs for government and business would significant erode the value gained from it as a source of local government income. Conversely, administering a local income tax as part of the national tax system would leave local taxation entirely under the control of central government.
Another alternative scheme would be to allocate all funding directly from central government finances - already around 75% of local authority income is from central budgets. The biggest argument against this is that it removes fiscal independence from local government, making them mere service providers. However, since local government in the UK has no constitutional guarantee, and is shaped entirely by the whim of central government, some critics argue that local authorities can never be independent of central government.
on 26 January 2007 investigated whether millions of homes had been placed in the wrong band in the original 1991 valuation. It was shown that the banding valuations were often done by 'second gear valuations', in other words valuations were often done by driving past homes and allocating bands via a cursory external valuation. The programme followed case studies of a system devised by the presenter Martin Lewis
, published on his website in October 2006, who had received thousands back in back payments after appealing their band allocations. This Council Tax Cashback system was said to have the potential to reach millions and received widespread publicity, likely to encourage people to challenge the system. There had been no information published on how many have been successful in obtaining a reduced banding until the 22 November 2008 when the Daily Telegraph, in a news article about the campaign by Martin Lewis, stated that in the past year 97,563 properties in England and Wales have been rebanded, with 69,695 of those down-graded.
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
, Scotland
Scotland
Scotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...
and Wales
Wales
Wales is a country that is part of the United Kingdom and the island of Great Britain, bordered by England to its east and the Atlantic Ocean and Irish Sea to its west. It has a population of three million, and a total area of 20,779 km²...
to part fund the services provided by local government in each country. (In Northern Ireland
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...
, the form of local taxation is rates
Rates (tax)
Rates are a type of property tax system in the United Kingdom, and in places with systems deriving from the British one, the proceeds of which are used to fund local government...
.) It was introduced in 1993 by the Local Government Finance Act 1992
Local Government Finance Act 1992
The Local Government Finance Act 1992 includes obligations of the occupants or the owners of properties in the United Kingdom to pay council tax.- External links :*...
, as a successor to the unpopular Community Charge
Community Charge
The Community Charge, popularly known as the "poll tax", was a system of taxation introduced in replacement of the rates to part fund local government in Scotland from 1989, and England and Wales from 1990. It provided for a single flat-rate per-capita tax on every adult, at a rate set by the...
. The basis for the tax is residential property, with discounts for single people.
As of 2011, the average annual levy on a property in England was £1,196.
Organisation
Council Tax is collected by the local authority (known as the collecting authority). However, it may consist of components (precepts) levied and redistributed to other agencies or authorities (each known as a precepting authority).Collecting authorities
The collecting authorities are the councils of the districts of England, principal areas of Wales and council areas of ScotlandSubdivisions of Scotland
For local government purposes, Scotland is divided into 32 areas designated as "council areas" which are all governed by unitary authorities designated as "councils"...
, i.e. the lowest tier of local government aside from parishes and communities.
Precepting authorities
The precepting authorities are councils from other levels of local government such as a county or parish councils and other agencies. In metropolitan counties where there is no county council, the joint boards are precepting authorities. There may be precepting authorities for special purposes which cover an area as small as a few streets or as large as an entire country.| Strategic authorities | Greater London Authority Greater London Authority The Greater London Authority is the top-tier administrative body for Greater London, England. It consists of a directly elected executive Mayor of London, currently Boris Johnson, and an elected 25-member London Assembly with scrutiny powers... , English county councils, Greater Manchester Combined Authority Greater Manchester Combined Authority The Greater Manchester Combined Authority is the top-tier administrative body for the local governance of Greater Manchester, England. The combined authority was established on 1 April 2011 and consists of ten indirectly elected members, each a directly elected councillor from one of the ten... |
| Joint boards | Passenger transport executive Passenger Transport Executive In the United Kingdom, passenger transport executives are local government bodies which are responsible for public transport within large urban areas... s, police authorities Police authority A police authority in the United Kingdom, is a body charged with securing efficient and effective policing of a police area served by a territorial police force or the area and/or activity policed by a special police force... , fire authorities Fire Authority In England and Wales a fire authority or fire and rescue authority is a statutory body made up of a committee of local councillors which oversees the policy and service delivery of a fire and rescue service... |
| Public-owned utilities | Scottish Water Scottish Water Scottish Water is a statutory corporation in Scotland that provides water and sewerage services. Unlike in England and Wales, water and sewerage provision in Scotland continues as a public corporation accountable to the public through the Scottish Government.... |
| Lowest-tier authorities | Civil parishes in England |
| Special purpose authorities | National park authorities National Park Authority A national park authority is a special term used in the United Kingdom for the legal body in charge of a national park. The powers and duties of the authorities are all similar, but do vary somewhat depending on the country in which they are situated.... , Olympic Delivery Authority Olympic Delivery Authority The Olympic Delivery Authority is the statutory corporation responsible for ensuring delivery of venues, infrastructure and legacy for the 2012 Summer Olympic and Paralympic Games in London... |
These all set their precepts independently. Each of the levying authorities sets a precept (total amount) to be collected for households in their area. This is then divided by the number of nominal Band D properties in the authority's area (county, district, national park, etc.) to reach the Band D amount.
Calculation
Each dwelling is allocated to one of eight bands coded by letters A to H (A to I in Wales) on the basis of its assumed capital value (as of 1 April 1991 in England and Scotland, 1 April 2003 in Wales). Newly constructed properties are also assigned a nominal 1991 (2003 for Wales) value. Each local authority sets a tax rate expressed as the annual levy on a Band D property inhabited by two liable adults. This decision automatically sets the amounts levied on all types of households and dwellings. The nominal Band D property total is calculated by adding together the number of properties in each band and multiplying by the band ratio. So 100 Band D properties will count as 100 nominal Band D properties, whereas 100 Band C properties will count as 89 nominal Band D properties. Each collecting authority then adds together the Band D amounts for their area (or subdivisions of their area in the case, for example, of civil parish council precepts) to reach a total Band D council tax bill. To calculate the council tax for a particular property a ratio is then applied. A Band D property will pay the full amount, whereas a Band H property will pay twice that. Please note there is no upper limit for band H. This means that in reality, someone who lives in a multimillion mansion, will only pay 3 times more than someone in a bedsit which falls into Band A.Revaluation
The government had planned to revalue all properties in England in 2007 (the first revaluations since 1993) but, in September 2005, it was announced that the revaluation in England would be postponed until "after the next election". At the same time, the terms of reference of the Lyons Inquiry were extended and the report date pushed out to December 2006 (subsequently extended to 2007). In Wales, tax bills based on the property revaluations done using 2003 prices were issued in 2005. Because of the surge in house prices over the late 1990s and early 2000s, more than a third of properties in Wales found themselves in a band higher than under the 1991 valuation. Some properties were moved up three or even four bands with consequent large increases in the amount of council tax demanded. Some properties were moved into new Band I at the top of the price range. Only 8% of properties were moved down in bands.However, a large shift of properties between bands will cause a shift in the allocation of the charge between bands, and the tax levied for each particular band will then drop, as the total amount collected will remain the same for each authority (see 'calculation of amount' above). Between the wholesale revaluations, a major change to a property (such as an extension, or some major blight causing loss of value) can trigger a revaluation to a new estimate of the value the property would have reached if sold in 1991. If such a change would result in an increase in value, then re-banding will only take effect when the property is sold or otherwise transferred.
Current bands
In England, the council tax bands are as follows :| Band | Value | Ratio | Ratio as % | Average |
|---|---|---|---|---|
| A | up to £40,000 | 6/9 | 67% | £845 |
| B | £40,001 to £52,000 | 7/9 | 78% | £986 |
| C | £52,001 to £68,000 | 8/9 | 89% | £1,127 |
| D | £68,001 to £88,000 | 9/9 | 100% | £1,268 |
| E | £88,001 to £120,000 | 11/9 | 122% | £1,550 |
| F | £120,001 to £160,000 | 13/9 | 144% | £1,832 |
| G | £160,001 to £320,000 | 15/9 | 167% | £2,113 |
| H | £320,001 and above | 18/9 | 200% | £2,536 |
In Wales
Wales
Wales is a country that is part of the United Kingdom and the island of Great Britain, bordered by England to its east and the Atlantic Ocean and Irish Sea to its west. It has a population of three million, and a total area of 20,779 km²...
, the bands were re-set on 1 April 2005 by the National Assembly for Wales
National Assembly for Wales
The National Assembly for Wales is a devolved assembly with power to make legislation in Wales. The Assembly comprises 60 members, who are known as Assembly Members, or AMs...
, based on 2003 valuations. In addition to revising the band boundaries upwards, an extra band was added.
| Band | Value | Pre-2005 value | Ratio | Ratio as % |
|---|---|---|---|---|
| A | up to £44,000 | up to £30,000 | 6/9 | 67% |
| B | £44,001 to £65,000 | up to £39,000 | 7/9 | 78% |
| C | £65,001 to £91,000 | up to £51,000 | 8/9 | 89% |
| D | £91,001 to £123,000 | up to £66,000 | 9/9 | 100% |
| E | £123,001 to £162,000 | up to £90,000 | 11/9 | 122% |
| F | £162,001 to £223,000 | up to £120,000 | 13/9 | 144% |
| G | £223,001 to £324,000 | up to £240,000 | 15/9 | 167% |
| H | £324,001 to £424,000 | £240,001 and above | 18/9 | 200% |
| I | £424,001 and above | 21/9 | 233% |
In Scotland
Scotland
Scotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...
, the current bands are
| Band | Value | Ratio | Ratio as % |
|---|---|---|---|
| A | up to £27,000 | 6/9 | 67% |
| B | £27,001 to £35,000 | 7/9 | 78% |
| C | £35,001 to £45,000 | 8/9 | 89% |
| D | £45,001 to £58,000 | 9/9 | 100% |
| E | £58,001 to £80,000 | 11/9 | 122% |
| F | £80,001 to £106,000 | 13/9 | 144% |
| G | £106,001 to £212,000 | 15/9 | 167% |
| H | £212,001 and above | 18/9 | 200% |
Scotland
Council tax rates have been frozen by the Scottish Government for a fourth time and the rates for Band D for 2011/12 will range from a low of £1,024 in the Western Isles to a high of £1,230 in Aberdeen.England
Rates for Band D.
* The average is for 2006, whereas the individual listings are for 2008.
* Some council areas have special rates for certain zones within the council.
| Council Area | Band D Rate | % of 2006 Avg | As at |
|---|---|---|---|
| Wandsworth | £676.16 | 53% | 2008 |
| Westminster | £681.68 | 54% | 2008 |
| Kensington & Chelsea | £1,031.15 | 81% | 2008 |
| Southwark | £1,180.94 | 93% | 2008 |
| Lambeth | £1,187.23 | 94% | 2008 |
| Hammersmith & Fulham | £1,193.33 | 94% | 2008 |
| Islington | £1,219.40 | 96% | 2008 |
| Average | £1,268 | 100% | 2006 |
| Camden | £1,300.52 | 103% | 2008 |
| Ealing | £1,344.10 | 106% | 2008 |
| Croydon | £1,357.64 | 107% | 2008 |
| Hounslow | £1,394.53 | 110% | 2008 |
| Richmond | £1,490.60 | 118% | 2008 |
A full list of rates for England are available from Communities and Local Government. Council tax banding information is available from the Valuation Office Agency. A search facility combining these two datasets is available at mycounciltax.org.uk.
Discounts
Individuals may apply to their local authority for council tax benefit, and subject to eligibility, will receive contributions to cover their tax liability. Payments are made direct to their council tax account, and no cash is paid to recipients. Local authorities receive funding from the Department for Work and PensionsDepartment for Work and Pensions
The Department for Work and Pensions is the largest government department in the United Kingdom, created on June 8, 2001 from the merger of the employment part of the Department for Education and Employment and the Department of Social Security and headed by the Secretary of State for Work and...
to both administer the council tax benefit system, and to cover payments. There may be further modifiers in certain circumstances, for example a discount for unoccupied property, a 25% discount for single occupants, or a total dispensation for diplomatic residences and residences completely occupied by students.
Exemptions
Some dwellings are exempt from paying Council Tax. The list outlined below broadly explains which types of properties may be exempt and where they will be exempt only for a specified length of time. Unless specified, there is no period of time for how long the exemption can last.The highlighted descriptions indicate when a property can be occupied by certain people as opposed to the unhighlighted ones where the property must have no people living there at all.
| Class | Description |
|---|---|
| A | Vacant dwellings where major repair works or structural alterations are required, underway or recently complete (up to twelve months). |
| B | Unoccupied (and furnished) dwellings owned by a charity (up to six months). |
| C | A vacant dwelling (i.e. empty and substantially unfurnished) (up to six months). |
| D | A dwelling left unoccupied by people who are detained in prison. Normal rates apply if they are imprisoned for non-payment of Council Tax. |
| E | An unoccupied dwelling which was previously the sole or main residence of a person who has moved into a hospital or care home. |
| F | Dwellings left unoccupied by deceased persons. |
| G | An unoccupied dwelling where the occupation is prohibited by law, however squatters can still be charged normal rates if they are found to be residing there. |
| H | Unoccupied dwellings of ministers of any religion. |
| I | An unoccupied dwelling which was previously the sole or main residence of a person who is the owner or tenant and has moved to receive personal care. |
| J | An unoccupied dwelling which was previously the sole or main residence of a person who is the owner or tenant and has moved to provide personal care to another person. |
| K | An unoccupied dwelling where the owner is a student who last lived in the dwelling as their main home. |
| L | An unoccupied dwelling that has been taken into possession by a mortgage lender. |
| M | A hall of residence provided predominantly for the accommodation of students. |
| N | A dwelling which is occupied only by students, the foreign spouses of students, or school and college leavers. |
| O | Armed forces' accommodation. |
| P | A dwelling where at least one person who would otherwise be liable has a relevant association with a visiting force. |
| Q | An unoccupied dwelling where the person who would otherwise be liable is unable to make use of the property because it is with a trustee in bankruptcy. |
| R | Empty caravan pitches or boat moorings not in use. |
| S | A dwelling where all occupants are aged under 18. |
| T | A dwelling which forms part of a single property which includes another dwelling and may not be let separately from that dwelling, without a breach of planning control. |
| U | A dwelling occupied only by a person, or persons, who is or are severely mentally impaired who would otherwise be liable to pay council tax or only by a one or more severely mentally impaired persons and one or more students, students' foreign spouses and school and college leavers. |
| V | A dwelling in which at least one person who would otherwise be liable is a diplomat. |
| W | A dwelling which forms part of a single property including at least one other dwelling and which is the sole or main residence of a dependant relative of a person who is resident in the other dwelling. |
How Council Tax is spent
Although it is the only tax which is set by local government, the Council Tax contributes only a small proportion (25%, on average) of local government revenue. The majority comes from central governmentCentral government
A central government also known as a national government, union government and in federal states, the federal government, is the government at the level of the nation-state. The structure of central governments varies from institution to institution...
grants and from business rates
Business rates
Business rates is the commonly used name of non-domestic rates, a tax on the occupation of non-domestic property. Rates are a property tax with ancient roots that was formerly used to fund local services that was formalised with the Poor Law 1572 and superseded by the Poor Law of 1601...
which are collected centrally and redistributed to local authorities.
Local government provide services such as police, fire, recycling, refuse collection and removal, schools, leisure centres, park and ride schemes, parks and open spaces, street cleaning, subsidising of public transport, tourism, museums, social housing grants, housing and council tax benefits, environmental health and food safety in pubs, restaurants and shops, planning services, support for voluntary groups, meals on wheels, facilities for young people, adapting homes for disabled people, play centres for children, cctv installation, sports facilities, issuing taxi licences, flood defences, and many others.
A significant proportion of local government services are stipulated by central government in the form of statutory provision. Local councils are obliged by law to provide these services. The remainder of services are discretionary and are determined by the local council.
Criticism
Council Tax is criticised for perceived unfairness in not taking into account the ability to pay (see regressive taxation). These critics point out that while the capital value of the property in which a person lives might give some indication of the relative wealth of the individual, it does not necessarily relate to current income. Council-tax advocates respond that those on low incomes can apply for council tax benefits which can significantly (or totally) reduce the amount the applicant pays. This argument presumes, of course, that the system of council tax benefit is itself a satisfactory scheme. In particular, not everyone who is eligible to benefit will make a claim.Critics also claim that Council Tax has a disproportionate impact on renters, or those occupying part-owned social housing. They are paying tax according to the value of a property that they may not have been able to afford to buy or even rent at market rate.
Equally, the tax isn't actually particularly proportionate even to property values. A band H property will pay at most three times as a band A, even though the value of the property may be ten or more times higher.
Whilst the tax may have regressive characteristics, supporters point out that there is a significant means tested benefit regime in place which offers rebates to those on low incomes. This has the effect of making the tax less regressive. Furthermore, in comparison to its predecessor - the Community Charge - council tax is straightforward to collect with in year collection rates averaging 97% in England.
The Liberal Democrats
Liberal Democrats
The Liberal Democrats are a social liberal political party in the United Kingdom which supports constitutional and electoral reform, progressive taxation, wealth taxation, human rights laws, cultural liberalism, banking reform and civil liberties .The party was formed in 1988 by a merger of the...
have proposed a system of local income tax to replace Council Tax, but when such a scheme, the Scottish Service Tax
Scottish Service Tax
The Scottish Service Tax is a proposed replacement for the Council Tax in Scotland. It is a progressive local income-based tax rather than a property-based tax. The main advocate for this tax is the Scottish Socialist Party....
, was proposed for Scotland, they opposed it. Critics of that suggestion have claimed that administering such a system independently of the national tax system would impose significant costs for government and business would significant erode the value gained from it as a source of local government income. Conversely, administering a local income tax as part of the national tax system would leave local taxation entirely under the control of central government.
Another alternative scheme would be to allocate all funding directly from central government finances - already around 75% of local authority income is from central budgets. The biggest argument against this is that it removes fiscal independence from local government, making them mere service providers. However, since local government in the UK has no constitutional guarantee, and is shaped entirely by the whim of central government, some critics argue that local authorities can never be independent of central government.
2007 media claims: "Millions may have overpaid"
An edition of the current affairs programme Tonight with Trevor McDonaldTonight (TV series)
Tonight is a British television newsmagazine, produced by ITV Studios and ITN for the ITV network. Since 1999, Tonight replaced the long-running investigative series World in Action...
on 26 January 2007 investigated whether millions of homes had been placed in the wrong band in the original 1991 valuation. It was shown that the banding valuations were often done by 'second gear valuations', in other words valuations were often done by driving past homes and allocating bands via a cursory external valuation. The programme followed case studies of a system devised by the presenter Martin Lewis
Martin Lewis (financial journalist)
Martin Steven Lewis is journalist, television presenter, website entrepreneur and author in the United Kingdom, who specialises in ways to save money...
, published on his website in October 2006, who had received thousands back in back payments after appealing their band allocations. This Council Tax Cashback system was said to have the potential to reach millions and received widespread publicity, likely to encourage people to challenge the system. There had been no information published on how many have been successful in obtaining a reduced banding until the 22 November 2008 when the Daily Telegraph, in a news article about the campaign by Martin Lewis, stated that in the past year 97,563 properties in England and Wales have been rebanded, with 69,695 of those down-graded.
External links
- Check your Council Tax band, from Directgov (England and Wales only)
- Check your Council Tax band, from the Scottish Assessors Association (Scotland only)
- Pay your Council Tax online, from Directgov
- Council Tax payments, discounts and appeals, from Directgov
- IsItFair - the UK Council Tax Protest Group
- Axe The Tax - Liberal Democrat anti-Council Tax website
- Ministerial correspondence relating to council tax in the financial year 1991-2 HM Treasury disclosure under the Freedom of Information Act
- Check if you're in the right council tax band
- full listing of rates for each council and banding information
- Office of Deputy Prime Minister Released Council Tax Figures