How much could council tax bills increase?

Council tax payers are facing increases of up to 5% or possibly much more as cash-strapped local authorities try to tackle debts.

"Millions of households will pay much more", said the Daily Express's personal finance editor Harvey Jones, as councils "scramble to raise all the money they can". Local authorities are allowed to increase this year's council tax bills by 3% for core services, and by a further 2% for social care responsibilities – and most in England and Wales are expected to do so.

Councils in financial trouble can also seek central government approval to raise bills further.

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What is council tax?

Council tax is an annual fee paid by households to their local council to help fund services including "rubbish collection and libraries", said MoneyHelper. Residents typically pay the tax in ten monthly instalments from April,  "followed by two months of not making any payments".

How much residents are charged is based on the open market value of a property at a "specific point in time", Which? explained. In England, council tax bills are based on what the property would have been worth on 1 April 1991, with properties put into one of eight valuation bands bands, ranging from band A for up to £40,000 to band H for more than £320,000. 

Council tax bands are "calculated differently" in Scotland, Wales and Northern Ireland, the site added. 

How to find your council tax band

You can check your council tax band at Gov.uk.

However, "hundreds of thousands" of homes across England and Scotland are believed to be in the wrong council tax band, said MoneySavingExpert, "due to how council tax bands were originally calculated".

When the new council tax system was launched back in 1991, "time was short, and the job large", so estate agents "and others" were recruited to help with valuations. But many valuers were still too rushed to gather "detailed information" and instead assessed properties during drive-bys, when they "mostly never even stopped their cars, never mind got out of them".

Although the Welsh government has since reassessed all homes there, the old valuations still stand in England and Scotland, the site added, "which is why you could be paying more than your neighbour even though you live in exactly the same size property".

How much will council tax increase by?

The Institute for Fiscal Studieshas calculated that if all councils hiked bills by the maximum allowed 5%, taxpayers would pay an extra £2.1 billion next year in total.

The average annual band D council tax bill in England for 2023-24 was already a "hefty £2,065", said Jones in the Daily Express, and a 5% increase would take that to £2,168.

And some debt-ridden local authorities are expected to increase bills by far more. 

Town halls such as Birmingham and Nottingham have "effectively declared bankruptcy", said The Telegraph's Daniel Martin, "suggesting their bills will have to soar". 

Birmingham City Council has sought permission to raise its council tax bills by up to 10% each year for two financial years. That could equate to a total 21% overall increase for residents by April 2025, said the BBC's political reporter Simon Gilbert,  "equivalent to £400 a year on a Band D property’s bill".

City council leader John Cotton told the broadcaster that residents would only be asked for extra money if needed, depending on what additional support was received from central government.

But the council "needs to save £300 million over the next two years", Gilbert reported, "and its financial challenges have been compounded by a £760 million equal pay bill and an £80 million overspend on an IT project". 

UK households usually get their council tax bills for the coming financial year in March or April, and payments are usually split into 10 instalments running from April through to the following January.

How to reduce your council tax bill

You can challenge your council tax bill if you think you are in the wrong band, "but be aware that the review might lead to your council putting your property in a higher band", warned MoneyHelper. Nearby properties could also be impacted.

However, "many types of people" are eligible for council tax discounts, said Which?, including full-time students "who usually pay no council tax at all",  and people living alone in a property, who get a 25% discount.

People on low incomes or "certain benefits" such as Universal Credit may also get "extra discounts or their bill wiped altogether", said The Sun. The paper advised anyone struggling to pay their bills to apply to their council for a "discretionary reduction".