Council Tax

The Council Tax is the main form of local taxation in England, Scotland and Wales. It is paid by some residents to the local authority. It was introduced in 1993 (by way of the Local Government Finance Act 1992) as a successor to the Community Charge (the "poll tax").

The base for the tax is residential property. Each dwelling is allocated to one of eight bands coded by letters A to H (A to I in Wales) on the basis of its assumed capital value (as of 1 April 1991 in England and Scotland, 1 April 2003 in Wales). Newly constructed properties are also assigned a nominal 1991 (2003 for Wales) value. Each local authority sets a tax rate expressed as the annual levy on a Band D property inhabited by two liable adults. This decision automatically sets the amounts levied on all types of households and dwellings. Single adults living alone are entitled to a 25% discount.

As of 2006, the average annual levy on a property is £1,056 (the average Band D tax is £1,268).

How Council Tax is spent

Although it is the only tax which is set by local government, the Council Tax contributes only a small proportion (25%, on average) of local government revenue. The majority comes from central government grants and from business rates which are collected centrally and redistributed to local authorities.

Local government provide services such as police, fire, recycling, refuse collection and removal, schools, leisure centres, park and ride schemes, parks and open spaces, street cleaning, subsidising of public transport, tourism, museums, social housing grants, housing and council tax benefits, environmental health and food safety in pubs, restaurants and shops, planning services, support for voluntary groups, meals on wheels, facilities for young people, adapting homes for disabled people, play centres for children, cctv installation, sports facilities, issuing taxi licences, flood defences, and many others.

A significant proportion of local government services are stipulated by central government in the form of statutory provision. Local councils are obliged by law to provide these services. The remainder of services are discretionary and are determined by the local council.

Calculation of amount

Council Tax is divided into a number of components. Depending upon where the dweller lives, there can be a separate charge made by the Greater London Authority, County Councils, Police Authorities, Fire Authorities, Transport Authorities, National Park Authority, Olympic Delivery Authority, District Councils, Scottish Water and Civil Parishes. These all set their precepts independently.

Each of the levying authorities sets a precept (total amount) to be collected for their area.

This is then divided by the number of nominal Band D properties in the authority's area (county, district, national park, etc.) to reach the Band D amount.

(The nominal Band D property total is calculated by adding together the number of properties in each band and multiplying by the band ratio. So 100 Band D properties will count as 100 nominal Band D properties, whereas 100 Band C properties will only count as 89 nominal Band D properties.)

Each collecting authority (district/borough council or unitary authority) then adds together the Band D amounts for their area (or subdivisions of their area in the case, for example, of civil parish council precepts) to reach a total Band D council tax bill.

To calculate the council tax for a particular property a ratio is then applied. A Band D property will pay the full amount, whereas a Band H property will pay twice that.

There may be further modifiers in certain circumstances, for example a discount for unoccupied property, a 25% discount for single occupants, or a total dispensation for diplomatic residences and residences completely occupied by students.

Revaluation

The government had planned to revalue all properties in England in 2007 (the first revaluations since 1993) but, in September 2005, it was announced that the revaluation in England would be postponed until "after the next election". At the same time, the terms of reference of the Lyons Inquiry were extended and the report date pushed out to December 2006 (subsequently extended to 2007).

In Wales, tax bills based on the property revaluations done using 2003 prices were issued in 2005. Because of the surge in house prices over the late 1990s and early 2000s, more than a third of properties in Wales found themselves in a band higher than under the 1991 valuation. Some properties were moved up three or even four bands with consequent large increases in the amount of council tax demanded. Some properties were moved into new Band I at the top of the price range. Only 8% of properties were moved down in bands.

However, a large shift of properties between bands will cause a shift in the allocation of the charge between bands, and the tax levied for each particular band will then drop, as the total amount collected will remain the same for each authority (see 'calculation of amount' above).

Between the wholesale revaluations, a major change to a property (such as an extension, or some major blight causing loss of value) can trigger a revaluation to a new estimate of the value the property would have reached if sold in 1991. If such a change would result in an increase in value, then re-banding will only take effect when the property is sold or otherwise transferred.

Bands

In England, the council tax bands are as follows :

Band	Value	Ratio	Ratio as %	Average
A	up to £40,000	6/9	67%	£845
B	£40,001 to £52,000	7/9	78%	£986
C	£52,001 to £68,000	8/9	89%	£1,127
D	£68,001 to £88,000	9/9	100%	£1,268
E	£88,001 to £120,000	11/9	122%	£1,550
F	£120,001 to £160,000	13/9	144%	£1,832
G	£160,001 to £320,000	15/9	167%	£2,113
H	£320,001 and above	18/9	200%	£2,536

In Wales, the bands were re-set on 1 April 2005 by the National Assembly for Wales, based on 2003 valuations. In addition to revising the band boundaries upwards, an extra band was added.

Band	Value	Pre-2005 value	Ratio	Ratio as %
A	up to £44,000	up to £30,000	6/9	67%
B	£44,001 to £65,000	up to £39,000	7/9	78%
C	£65,001 to £91,000	up to £51,000	8/9	89%
D	£91,001 to £123,000	up to £66,000	9/9	100%
E	£123,001 to £162,000	up to £90,000	11/9	122%
F	£162,001 to £223,000	up to £120,000	13/9	144%
G	£223,001 to £324,000	up to £240,000	15/9	167%
H	£324,001 to £424,000	£240,001 and above	18/9	200%
I	£424,001 and above		21/9	233%

In Scotland, the current bands are

Band	Value	Ratio	Ratio as %
A	up to £27,000	6/9	67%
B	£27,001 to £35,000	7/9	79%
C	£35,001 to £45,000	8/9	89%
D	£45,001 to £58,000	9/9	100%
E	£58,001 to £80,000	11/9	122%
F	£80,001 to £106,000	13/9	144%
G	£106,001 to £212,000	15/9	167%
H	£212,001 and above	18/9	200%

Rates

England rates for Band D.

* The average is for 2006, whereas the individual listings are for 2008.
* Some council areas have special rates for certain zones within the council.
* Perhaps this section should be a new topic, as it will get very long as it gets filled out.

Council Area	Band D Rate	% of 2006 Avg	As at
Wandsworth	£676.16	?	2008
Westminster	£681.68	?	2008
Kensington & Chelsea	£1031.15	?	2008
Southwark	£1,180.94	?	2008
Average	£1268	100%	2006
Lambeth	£1,187.23	?	2008
Hammersmith & Fulham	£1,193.33	?	2008
Islington	£1,219.40	?	2008
Camden	£1,300.52	?	2008
Ealing	£1,344.10	?	2008
Croydon	£1357.64	?	2008
Hounslow	£1394.53	?	2008
Richmond	£1490.60	?	2008

Wales

Scotland

Council Tax Benefit

Main article: Housing Benefit

Individuals may apply to their local authority for council tax benefit, and subject to eligibility, will receive contributions to cover their tax liability. Payments are made direct to their council tax account, and no cash is paid to recipients. Local authorities receive funding from the Department of Work and Pensions to both administer the council tax benefit system, and to cover payments.

Criticism

Council Tax is criticised for perceived unfairness in not taking into account the ability to pay (see regressive taxation). These critics point out that while the capital value of the property in which a person lives might give some indication of the relative wealth of the individual, it does not necessarily relate to current income.

Critics also claim that Council Tax has a disproportionate impact on renters, or those occupying part-owned social housing. They are paying tax according to the value of a property that they may not have been able to afford.

Equally, the tax isn't actually particularly proportionate even to property values. A band H property will pay at most three times as a band A, even though the value of the property may be ten or more times higher.

Whilst the tax may have regressive characteristics, supporters point out that there is a significant means tested benefit regime in place which offers rebates to those on low incomes. This has the effect of making the tax less regressive.

The Liberal Democrats have proposed a system of local income tax to replace Council Tax, however when such a scheme, the Scottish Service Tax, was proposed for Scotland, they opposed it. Critics of that suggestion have claimed that administering such a system independently of the national tax system would impose significant costs for government and business would significant erode the value gained from it as a source of local government income. Conversely, administering a local income tax as part of the national tax system would leave local taxation entirely under the control of central government.

Another alternative scheme would be to allocate all funding directly from central government finances - already around 75% of local authority income is from central budgets. The biggest argument against this is that it removes fiscal independence from local government, making them mere service providers. However, since local government in the UK has no constitutional guarantee, and is shaped entirely by the whim of central government, some critics argue that local authorities can never be independent of central government.

2007 media claims: "Millions may have overpaid"

An edition of the current affairs programme Tonight with Trevor McDonald on 26 January 2007 investigated whether millions of homes had been placed in the wrong band in the original 1991 valuation. It was shown that the banding valuations were often done by 'second gear valuations', in other words valuations were often done by driving past homes and allocating bands via a cursory external valuation.

The programme followed case studies of a system devised by the presenter Martin Lewis, published on his website in October 2006, who had received thousands back in back payments after appealing their band allocations. This '"Council Tax Cashback".' system was said to have the potential to reach millions and received wide spread publicity, likely to encourage people to challenge the system.

Following the programme and subsequent newspaper reports, a large number of people have attempted to appeal against their banding. To date there has been no information published on how many have been successful in obtaining a reduced banding.

See also

• Local income tax

External links

• Council Tax, from the Valuations Office Agency
• Pay your Council Tax online, from Directgov
• Council Tax payments, discounts and appeals, from Directgov
• IsItFair - the UK Council Tax Protest Group
• Axe The Tax - Liberal Democrat anti-Council Tax website
• Ministerial correspondence relating to council tax in the financial year 1991-2 HM Treasury disclosure under the Freedom of Information Act
• Check if you're in the right council tax band