How your council tax is calculated: everything you need to know

Households may be in line to pay more council tax after Chancellor Jeremy Hunt made changes to rules in today's Autumn Statement.

Local authorities can now increase council tax by a maximum of 5% a year from April 2023 without a referendum - 3% for all local authorities and an additional 2% for those that have social care responsibilities. This is up from 2.99%.

The chancellor only lightly touched on the changes to council tax rules during his speech in the Commons but the Statement reads: "This will give local authorities greater flexibility to set council tax levels based on need, resources and priorities of their area, including adult social care." 

It may not sound like a big rise but amid the cost of living crisis, with the likes of higher energy costs, it will be another expense to budget for.

For example, Leeds City Council currently charges just over £1,860.22 for Band D households. But with a 3% rise, households could be paying over £56 more a year - paying £1,915.80 in total. And with a 5% rise, households could be paying over £93 more a year - paying £1,953 in total.

Council tax helps fund a long list of local services like bin collections, police and fire services, support for the elderly, street cleaning and looking after parks and cemeteries.

Over £32billion was collected in council tax last year by local authorities across England, and with bills possibly rising again, we explain everything you need to know.

How is council tax calculated?

How much you pay in council tax depends on two things: your property’s council tax banding, and how much money your local authority needs for public services.

The rule is that the higher the value of your property, the more you pay in council tax. In England and Scotland, Band A is the lowest band rating and incurs the lowest rate of council tax, while at the other end of the scale, Band H means residents pay the highest council tax bills.

Council tax bills are based on Band D which is used as the standard measure of council tax (opens in new tab).  Households in Band D pay an average of £1,966 a year (in 2022-23), and for households in bands either side of this, council tax bills are then either reduced on a sliding scale down to Band A, or increased upwards on a sliding scale up to Band H. 

As council tax could now rise by 5% due to changes announced in the Autumn Statament, this figure could increase to around £2,064 in 2023-24.    

Payments can be made in ten monthly instalments, with a payment break in February and March the following year.  You can arrange to pay in twelve monthly payments, (at no extra cost), if you contact your local council.

How much is my council tax?

If you don’t have your bill to hand, and you need to check which council tax band you’re on, there are other ways to check.  

You can do this using the postcode checker (opens in new tab) on the Government website for properties in England and Wales and on the Scottish Assessors (opens in new tab) website for properties in Scotland. In Northern Ireland, there’s a system of rates, rather than council tax. 

You can also find the annual council tax charged by any local authority using the Which? postcode checker (opens in new tab).   

Council tax bills for properties in the same band will vary across different authorities, depending on the area and services provided. For example, a Band A property in Boston, Lincolnshire means a council tax bill of £1,325, compared with £1,406 in Cornwall.  

At the other end of the scale, a Band H property in Boston means an annual bill of £3,975 compared with £4,218 in Cornwall.

Can the council raise council tax?

Local authorities can put up council tax bills each year, however they can’t charge what they like, without further consultation.

During the Autumn Statement on 17 November, the Chancellor gave the green light for councils to increase council tax bills by up to 5% for the 2023/2024 year.  

For example, Bristol City Council currently charges just over £2,230 for Band D households. But with a 3% rise, households could be paying over £67 more a year - paying £2,296 in total. And with a 5% rise, households could be paying around £111 more a year - paying £2,341 in total.

If they want to charge more, this needs to be agreed by a local referendum, according to the Local Government Association.

How can I reduce the amount of council tax I’m paying?

You may be able to get a reduction on your council tax bill (opens in new tab) in certain circumstances, for example if you live alone, you can qualify for a 25% discount.  

And if you’re selling a property after someone’s who died, there’s no council tax liability until after Probate, providing the property remains empty.

Households in England and Scotland will also get a £150 non-repayable council tax rebate this April as part of a financial support package to ease the burden of rising costs.