What is council tax and how does it work?
Council tax helps pay for your local services, but do you understand how it works and whether you’re paying too much?
Local councils provide a lot of the local services we take for granted and one of the ways those services are funded is through council tax.
It helps pay for the services you might immediately think of, like libraries, bin collections, the police force, the fire service, transport and road maintenance. But it also pays for local sport centres and parks as well as other facilities we may use less frequently like trading standards and registries for births, marriages and deaths.
You can find a clear breakdown of how your money is spent by looking at your bill. Each year your council should send you your annual bill and payment plan, and it should also include a breakdown of how the council budget has been allocated.
Council tax can feel like a pretty big cost over the year so sometimes it’s good to see what exactly you’re paying for.
How much is council tax?
Unfortunately, we can’t give you a simple number because the amount of council tax you pay depends on a few different factors, including the rates set by your specific council and the value of your home.
However, it can be a significant bill for many households, so it’s important to set up payments as soon as you move in. Otherwise, the risk is that you fall behind and need to pay a bigger bill to catch up later. It’s much better to set up a monthly payment as soon as you can.
The cost doesn’t change depending on whether you own the house you live in or rent it. However, if you don’t rent a whole house or flat, but just rent a room in an HMO – a house in multiple occupation – then it is usually the landlord’s responsibility to pay the tax.
And if you pay for a room in someone else’s home, then your live-in landlord has responsibility for paying council tax, which will usually be reflected in the amount of rent they charge you.
If you’re struggling to pay your bills because of the coronavirus crisis then don’t just ignore council tax. Get in touch with your council to explain why you’re struggling and they can help by arranging a repayment plan.
Some councils are even offering extra support, including reductions, so the sooner you contact them the better.
What is my council tax band?
In most parts of the UK, the amount you pay is worked out based on what band your property is in. This is boring but important, because you need to understand the band your home is in so you can check you’re not overpaying.
The system varies depending on where in the UK your property is. England and Scotland both have a system of eight bands, labelled A to H, which are based on the value of the property back in 1991.
In Wales there are nine bands but these are based on the value of each property in 2003, because that’s when they were revalued.
Homes built after those valuation dates are assigned council tax bands by special officials from the VOA – the Valuation Office Agency.
With all those systems, the further down the alphabet the letter your house is in, the more you pay.
Northern Ireland is different to the rest of the UK. Known as ‘rates’ rather than council tax, your bill is based on the value of your property.
What if I’m in the wrong band?
You can check which band you’re in by looking at your bill. If you don’t have that handy, then go online; in England and Wales you can easily find your council tax band by entering your postcode and in Scotland you can check using the Scottish Assessors Association website.
Occasionally, a home or even a whole street is in the wrong band, sometimes because of an error in the original valuation. If you think your home is in the wrong band, then you can ask for it to be reviewed and you may be moved to a lower rate.
If that happens then you will also receive a repayment of the extra you’ve been paying, backdated to whenever you moved in.
There’s a guide to challenging your band available on the .gov.uk website. You’ll see that you can only challenge your band if you’ve been in the property less than six months. There are only very specific circumstances where you can challenge a bill after six months, including a change in either your property or its use, or a change to the local area.
An important thing to remember is that when you ask for your council tax band to be reviewed, they won’t just consider whether it should go down. They will also consider whether it should go up.
So only ask for a review if you genuinely believe you should be in a lower band and you have evidence to back that up.
How do I pay my council tax?
When you move into a new home you’ll need to contact the council and register, they will then send you a bill. They should also tell you how to pay and when each payment is due.
You can set up a direct debit, make payments online or you may be able to get a card that lets you make cash payments at some newsagents and post offices.
Can I spread the cost over 12 months?
Although most households pay their council tax bill split over 10 months, you might find it more affordable to spread it over 12 months. Contact your local council straightaway if this option would make payments more manageable.
What happens if I miss a council tax payment?
If there’s a chance you will struggle to make a payment then it’s really important you contact your council as soon as you can.
They may be able to offer some help or guidance, or to increase your future payments to offset the one you miss.
But if you simply ignore the letters from your council then you might end up with a demand for the full year’s council tax to be settled within seven days. If you don’t make that payment, then your council will usually start legal action to get the money.
Council tax discounts and reductions
If you are on a low income or you’re on certain benefits then you might qualify for a discount on your bill known as a council tax reduction or council tax support, which replaced the old system of council tax benefit.
Different councils have different schemes and different criteria so if you think you need help then contact yours to ask what support is available.
Some common reasons you might qualify for support include:
Council tax exemption for students: If everyone in your household is a full-time student then you don’t have to pay council tax. To qualify for that exemption, courses must be at least one year in length and involve 21 hours of study a week as a minimum.
Council tax single person discount: If you live on your own then you can apply for a 25% discount on your bill.
Council tax discount for people who have just left care: Care-leavers may also get a reduction in council tax or may not even have to pay it all.
Council tax reduction for disabled: If you need a larger home because of a disability, then you may be able to get assigned a low band and pay a lower rate as a result.
Again, get in touch with your council to talk through what extra help you might be entitled to.
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Felicity is a personal finance journalist. She regularly writes for The Times, The Mirror and The Independent. She has won five awards for her work, including Household Money Journalist of the year. Read more