Please note that tax treatment depends on the specific circumstances of the individual and may be subject to change in the future.
Following the announcement of the 2021 Autumn Budget, fiscal watchdog, the Office for Budget Responsibility (OBR), has revealed that UK households could see their Council Tax bills rise significantly in the next few years.
So how much could Council Tax go up? And is there any way you can cut your bill? Let’s find out.
Budget 2021: Is Council Tax rising?
According to the OBR’s Economic and Fiscal Outlook, total Council Tax receipts will hit £48.4 billion in 2026/2027, up from £36.3 billion in 2019/2020. This represents a 33% increase, or £12.1 billion and translates to about £435 extra per household.
The OBR’s follows the government’s confirmation in the 2021 Autumn Budget that local authorities will be able to raise Council Tax by a maximum of 3% without having to hold a referendum, with 1% of this going to social care.
As reported in The Telegraph, the Institute for Fiscal Studies (IFS) found that a 3% increase could see the average bill, which currently stands at £1,428, rise by £39.92 next April.
However, funding pressures on many local councils means that increases of more than the 3% announced in the 2021 Budget could be on the cards in the coming years.
Can you reduce your Council Tax bill?
Council Tax is steadily increasing to help meet rising social care costs. Last year, councils were able to raise taxes by a staggering 5%.
Though the increase this year will be less given the 3% cap, it could still be significant. Given that other tax hikes, such as a 1.25% increase on National Insurance, are on the horizon, the impact on Brits’ budgets could be huge.
If you are concerned about rises in Council Tax and how they could affect your finances, the good news is that there are ways to cut your bill.
1. Challenge your Council Tax band
It is estimated that hundreds of thousands of properties in the UK could be in the wrong band. That means that a lot of people could be paying more Council Tax than they need to.
If you think you might be in the wrong band, you might want to consider launching a challenge. If successful, you could get a refund worth thousands of pounds in addition to seeing your bill reduce significantly every year.
The MoneySavingExpert website has a comprehensive step-by-step guide on how to check whether you qualify for a refund.
If your check confirms that you are in the wrong band, you can make a challenge through the Valuation Office Agency (VOA).
2. Apply for a Council Tax reduction
You could qualify for a Council Tax reduction if you are on a low income, claiming certain benefits or caring for others, among other circumstances.
If eligible, your bill could be cut by between 25% and 100%, meaning that there is a chance of avoiding Council Tax entirely.
To find out whether you are eligible for a Council Tax reduction, contact your local council.
3. Get a Council Tax discount
You could be eligible for a Council Tax discount that would reduce the Council Tax you pay. For example, if you live alone or with people considered ‘disregarded’, you could get a 25% discount.
If everyone in a particular residence is ‘disregarded’ you will get a 50% discount. Those considered to be ‘disregarded’ include but are not limited to:
- Apprentices
- Full-time students
- Carers
- People who are severely mentally-impaired
- People living in care homes
- Resident hospital patients
To see what kind of discount you could qualify for, check with your local council.
Please note that tax treatment depends on your individual circumstances and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
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About the author
Sean is a personal finance writer with a strong passion for helping others become more financially literate and make better financial decisions. He covers everything from credit cards to savings to investing.
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