What does my council tax pay for, how is it calculated and can I reduce what I pay?

You may have received a letter from your local council asking you to pay council tax at your property.

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But what exactly is it, and why do we have to pay it? Here’s everything you need to know.

What is council tax?

Council tax is an annual fee your local council charges you for the services it provides and is normally paid in 10 monthly instalments.

It is a tax on domestic property and was introduced in 1993 by the Local Government Finance Act 1992, replacing the short-lived Community Charge, which in turn replaced domestic rates.

Northern Ireland did not switch to council tax in the 1990s and kept the old system of domestic rates.

In 2007, Northern Ireland changed to a modified system of domestic rates based on the capital value of individual properties.

What does my council tax pay for?

Council tax is used to pay for a range of services such as street cleaning and rubbish collection as well as the maintenance of roads and street lighting.

However, the list does not end there, and local councils can use the tax to fund youth services, libraries, social care, and leisure facilities, including swimming pools and recreation centres.

In Scotland, the cost of water, sewerage, and drainage is included in your council tax bill.

The rates paid in Northern Ireland contribute to public services such as health, education, justice and other regional services.

How is it calculated?

Council tax bills in England, Scotland, and Wales follow a system that divides properties into one of eight bands (A to H) or nine bands in Wales (A to I).

These bands are based on property value, and the tax is set as a fixed amount for each band, depending on the price they would have sold for in April 1991.

If a property is more valuable, the owner will pay higher tax rates, and vice versa.

Properties in Wales were revalued in 2003, meaning council tax bands are based on their market value on 1 April 2003.

In England, the highest band (H) currently applies to all homes valued at more than £320,000, while Scotland’s top rate starts at just over £212,000.

The lowest council tax band (A) applies to homes worth £40,000 or less in England, £44,000 or less in Wales and £27,000 or less in Scotland.

Each household is billed on the assumption that it comprises two or more adults, meaning bills do not increase if three or more people live in the property.

If one person resides in the dwelling, 75% is payable, and an empty property only attracts a 50% charge.

In Northern Ireland, domestic rates are calculated by multiplying the rateable capital value of your property by the domestic regional rate plus domestic district rate added together - giving you the ‘domestic rate poundage’ for your council area.

The domestic regional rate is the amount of pence in every pound you pay to the Assembly for regional services.

The domestic district rate is the amount of pence in every pound you pay to your district council for local services.

Can I reduce the amount of council tax I pay?

There are several ways by which you can reduce your council tax payments, although you have to meet specific criteria.

For example, if you live alone, you can get a 25% reduction, or, if you’re on a low income, you can share your circumstances with your council, and they will work out how much your tax can be reduced by.

If you’re a student and live alone or share the rent with other students, you may be exempt from paying council tax, and living in halls of residence will also make you exempt.

Other groups who can apply for discounts to the overall council tax bill include apprentices, student nurses, and carers (50%) and members of the armed forces (100%).

There is also a way to check what council tax band your property falls under, and if this still applies, by requesting a new valuation if you believe there are grounds for appeal.

This typically comes if there have been changes to the property since it was built.

If revalued, there is the chance the property could be moved to a lower band, meaning a reduction in your overall council tax bill, or moved up a band, which would be more expensive.

In Northern Ireland you can also apply to have a new property valued, or apply for a valuation review to ensure you are paying the right amount of rates.

How can I claim a council tax rebate?

A tax rebate is essentially a refund you receive in the form of credit from HM Revenue and Customs (HMRC).

You get one when you’ve paid too much tax on, among many other things, your income or a redundancy payment.

Usually, you wouldn’t get a rebate on your council tax - it would just get reduced.

If you’ve paid too much council tax or are eligible for a reduction, the council will reduce your future bills rather than return money to you.

Due to a sharp increase in household bills, Chancellor Rishi Sunak recently announced that households in council tax bands A to D - i.e. low-to-middle income households - would receive a council tax rebate of £150.

In Scotland, £150 will go to anyone in Scottish council tax bands A to D, plus those in bands E to H if they are considered vulnerable or on a low income.

In Wales, those in council tax bands A to D and those who are under the Council Tax Reduction Scheme in any band will receive £150.

How can I check my council tax band?

If you live in England and Wales, the best way to check your Council Tax band is via the official government page.

All you need to do is enter an address or postcode on the government page and that should tell what band you are in.

Those living in Scotland can use the Scottish Assessors website to check their band. In Northern Ireland, you can find more information on how properties are valued through the Northern Ireland government website.