For some reason people seem to resent council tax a bit more than other forms of tax. Perhaps it’s because for most people their income tax and national insurance contributions are skimmed off their pay before the money ever hits their account, while VAT is usually included in the stated price of goods and services so we don’t always notice it. Council tax, on the other hand, comes in the form of significant monthly payments or a big annual bill.
However, council tax generates vital funds to maintain the essential infrastructure of our local areas and allows councils to provide care for the most vulnerable in society.
But who needs to pay council tax and how much does it cost?
What does council tax pay for?
Unlike other taxes, it’s pretty easy to see where your council tax is going. It pays for myriad local services like refuse collection and recycling, libraries, parks, bus services, trading standards enforcement, street cleaning, museums, planning and homelessness services. Above all else, council tax funds the care sector, and in fact almost 60p in every pound raised through council tax goes towards providing care services for vulnerable adults and children.
Is it the landlord or the tenant who pays?
For residential properties, it’s the person living there who pays the council tax. The landlord will need to pay for any periods between tenancies, but otherwise it’s usually the tenant’s job to pick up the council tax.
Normally just one tenant will be on the bill (as with utility bills), but tenants will usually split the costs.
How is it calculated?
Council tax is calculated through a banding system, based on the value of the property. Because property values fluctuate over time, all council tax banding is based on what the property would have sold for at a specific point in time – 1 April 1991 in England and Scotland or 1 April 2003 in Wales. Clearly many modern properties weren’t even built in 1991, but this doesn’t matter, since it’s the hypothetical value that matters. Even if you actually know how much your home was historically worth in 1991, councils have specific criteria for council tax banding and their valuation might not match the real-world value.
There are eight council tax bands (nine in Wales). Properties in band A are the ones valued at up to £40,000 (remember these are 1991 prices, not modern ones), while properties in band H are those valued at over £320,000.
In certain situations – such as when a property is newly built or has been made smaller – councils will automatically assess/reassess homes for banding purposes, but you can also appeal against their existing assessment of the property if you believe you’re paying the wrong amount. There’s also a concern that many homes are in the wrong band, and councils may periodically carry out re-banding initiatives to try and rectify this.
While banding is universal, local councils set their own council tax rates and these can vary quite widely.
Does everyone have to pay council tax?
Not everyone has to pay council tax. Some people are exempt, while others can get reductions.
Properties inhabited only by students, under-18s or people with severe mental disabilities are exempt from paying council tax, but everyone living there has to be in these categories to qualify for the exemption. A house with four students and one non-student would still have to pay.
Annexes occupied by dependants of the main household (for example, a ‘granny flat’ or an annex built for a disabled person) are exempt from council tax, as are properties that are empty because the person who lives there is in care or has gone to care for someone else.
Households containing people with disabilities will often get a reduction, as will annexes containing family members of the people in the main house. People on benefits may also be eligible for a reduction.
The most common reduction is a ‘single person’s discount’. You can get 25% off if you live alone or with certain categories of ‘disregarded people’, such as children or live-in carers.
How to pay
Councils will track you down pretty much as soon as you move into a property. As soon as the previous tenant notifies them that they’ve moved out, council tax will begin accruing and they’ll start writing to the address wanting to know who lives there now. It won’t go away so it’s best to just get in contact with them ASAP and start paying.
Once your tenancy is established, you’ll normally get a council tax bill at the beginning of each tax year. The full sum will usually be broken down into ten monthly payments (followed by two months with nothing to pay), but most councils will also allow you to break it down into 12 monthly payments. Some may offer a discount for paying the whole lot up-front, or may try and insist you do this if you’ve previously been done for non-payment.
The easiest way to pay council tax is by direct debit. That way you can be sure you won’t miss a payment. It’s worth being clear that trying to dodge council tax is a terrible idea. Councils know every trick in the book and they will pursue arrears persistently and sometimes quite aggressively. Many councils are in a bit of a hole financially, with limited funding from central government and soaring costs – particularly for social care – so they simply can’t afford to let people slip through the net.