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Council Tax

In the UK, council tax is charged by the local councils to help them manage the expenses for providing local services. These local services include refuse collection, schools, social services, and environment conservation, among others. A household should have minimum two adults for it to be bound to pay full council tax. The local council sets the rate of council tax every year.

How is council tax calculated?

Council tax is decided by:

  1. The area of residence
  2. The valuation band of the property according to the local council
  3. Eligibility for discount or exemption from council tax under special circumstances

Note that in England and Scotland, the property's valuation band is on the basis of its value as of 1st April, 1991, and not its present value. In Wales, the property's valuation band is on the basis of its value as of 1st April, 1993.

Example 1

Let's say you are a resident of the Ealing council, London. The council has eight valuation bands of between A to H. Based on the valuation of your property at 1991 values you may be in any of these bands. If the value of your property is up to £40,000 (at 1991 rates) you will be in the 'A' valuation band, and your council tax payable will be £905.95 per annum. In case you are in highest band 'H' with a property value of more than £320,000, you will have to pay council tax of £2,717.86 per annum.

Are there any discounts and exemptions on council tax?

Based on your individual situation, you may eligible for a discount or even a full exemption on council tax. In case you are the only adult living in your home, you can get 25% off on your council tax bill. This discount is also available even if you live with others who are not considered adults for purposes of council tax calculations. Some of these non-adults are children below the age of 18, college and university students (full-time), student nurses, among others.

Residents with low income can also get a reduction in council tax depending on their council's rules. Discount is also available in case of a disabled member in the household, because of whom the family requires a bigger property. These are only some representations, and there are various other exemptions available. You should check your eligibility status with your local council.

Example 2:

Continuing with the above example, suppose your property is in the 'A' category, and you are the only adult in the household with one child below 18. If this is the case, you can get a 25% discount on your council tax liability. So instead of £905.95 per annum, you will have to pay around £680 as council tax.

How does council tax affect the household budget?

Council tax is an unavoidable expense. You will get your annual council bill in March, which you will have to pay in 10-12 monthly installments by March of next year. Non-payment of council tax can lead to legal problems.

You can use our household budget calculator to check the impact of council tax on your household budget, so that you can plan your other expenses accordingly.

iCalculator Tip:

You need to confirm the valuation band of your property. In case your property is in an incorrect valuation band, you will end up paying more council tax than the actual amount.

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