Council tax is one of those ongoing costs that many first time buyers overlook when budgeting for a new home. It can add over 2,000 pounds per year to your outgoings, and the amount varies enormously depending on where you live and which band your property falls into. Understanding how council tax works can help you budget accurately and potentially save money.
How Council Tax Bands Work
In England, every residential property is assigned a council tax band from A to H based on what the property would have been worth on 1 April 1991. This valuation date has never been updated, which means that the bands are based on property values from over three decades ago. Band A covers properties valued at up to 40,000 pounds in 1991, while Band H covers those valued at over 320,000 pounds. The Valuation Office Agency is responsible for assigning and maintaining these bands.
In Scotland, a similar system operates but with different valuation bands based on property values as of 1 April 1991 as well, though the Scottish Government has introduced additional bands for higher value properties. Wales revalued its properties in 2003, using 1 April 2003 values, and has nine bands from A to I. Northern Ireland uses a different system entirely, based on the capital value of the property.
The actual amount you pay depends on your local council. Each council sets its own rate for Band D, and all other bands are calculated as a proportion of this. Band A pays two-thirds of the Band D rate, while Band H pays twice the Band D rate. This means two identical properties in different council areas can have very different bills, and a smaller property in an expensive council area might cost more in council tax than a larger property in a cheaper area.
Discounts and Exemptions
Several discounts and exemptions can reduce your council tax bill. The most common is the single person discount, which gives you 25 percent off your bill if you are the only adult living in the property. This discount is not means-tested, so it applies regardless of your income. You need to apply to your local council to receive it, and you must inform them if another adult moves in.
Full-time students are disregarded for council tax purposes. If everyone in the household is a full-time student, the property is exempt from council tax entirely. If one person is a student and the other is not, the non-student can claim the single person discount. Some other groups are also disregarded, including certain carers, people with severe mental impairment, and members of visiting armed forces.
Properties that are unoccupied and unfurnished may qualify for a discount, although many councils have reduced or eliminated this in recent years. Some councils now charge a premium of up to 300 percent on properties that have been empty for extended periods, as a measure to encourage owners to bring homes back into use. If you are considering buying a property that has been empty, check with the local council about any surcharges that may apply.
How to Check and Challenge Your Band
You can check your property's council tax band for free on the GOV.UK website by entering your postcode. It is worth doing this before you buy a property so that you can factor the council tax into your monthly budget. You can also see the bands of neighbouring properties, which can be useful for comparison.
If you believe your property is in the wrong band, you can challenge it by contacting the Valuation Office Agency in England and Wales, or the Scottish Assessors Association in Scotland. Valid reasons for a challenge include evidence that comparable properties in your area are in a lower band, or that the property has been significantly altered in a way that would reduce its 1991 value, such as the removal of a bedroom or loss of garden land. Be aware that a challenge can result in your band going up as well as down, so proceed carefully and gather evidence first.
Budgeting for Council Tax
When planning your household budget, always check the council tax band and the local council's current rates for any property you are considering buying. The difference between bands can be substantial, sometimes hundreds of pounds per year. Many councils offer the option to pay in ten monthly instalments rather than twelve, which means no payments in February and March, but some councils now offer twelve-month payment plans if you prefer smaller monthly amounts. If you are on a low income, you may qualify for council tax reduction, previously known as council tax benefit, which is administered by your local authority and can reduce your bill significantly or even eliminate it entirely.