What is council tax?

Council tax is a tax levied on domestic properties. It is set and collected by billing authorities in England and Wales (district and unitary councils) and levying authorities in Scotland.

The revenue collected forms part of the overall spending ‘pot’ available to the relevant local authority, and is used to pay for local services.

In England, additional organisations, such as the county council, parish council, fire authority and Police and Crime Commissioner, also set precepts (additional amounts) as part of council tax. These appear as separate lines on the council tax bill and form parts of the total council tax demand. This money helps to fund the additional organisations.

Who has to pay council tax?

The council tax must be paid by the occupants of a property (unless an exemption applies).

Where a property is rented out, the tenant(s) are responsible for council tax (unless the property is a registered House in Multiple Occupation or HMO).

In most cases, the occupants of the property are ‘jointly and severally liable’ – that is, if the bill is not paid, the council can pursue each of them for the full amount. Councils must offer the opportunity to pay in monthly instalments, though this can be withdrawn if payments are missed.

How is council tax calculated?

The amount of council tax a person must pay each year depends on three things:

  • the valuation band the property is in
  • how much money the local authority charges for that band
  • whether the person is eligible for any discounts or exemptions

The Valuation Office Agency places all domestic properties in England in one of eight valuation ‘bands’ (A-H). The local authority is then responsible for setting the council tax rate for each of the valuation bands in their area, and collecting the revenue.

Can a person appeal against their council tax banding?

Yes. If a person wants to challenge their council tax banding they can appeal to the Valuation Office Agency. In most cases, an appeal must be made within six months of moving in to the property. However, a request for an informal banding review can be made at any time.

A person must continue to pay their council tax bill while they are challenging it.

What happens if a council tax bill is unpaid?

Constituents who do not agree with the amount of council tax they have been charged, or who have difficulty paying, should contact their council in the first instance.

If a council tax instalment is unpaid, the council has the power to apply to the magistrates’ court for a ‘liability order’. If a liability order is granted, the full amount must be paid. The court also has the option of putting in place an attachment of earnings order, where a sum is deducted from the constituent’s pay packet each month.

Councils have the power to ‘enforce’ a liability order by using bailiffs to recover property to the value of the debt. If this fails, the court also has the power to send a non-payer to prison for three months. The court will normally only do this if the non-payer is actively refusing to pay.

Discounts and exemptions

There are a large number of discounts and exemptions in the council tax system. In general, exemptions apply to properties and discounts apply to people. Determining whether someone is eligible for a discount, or whether a property attracts an exemption, can be complex and can be influenced by previous case law.

Common discounts

Discounts of most interest to constituents include:

  • The single person discount – a 25% reduction where only one liable person lives in a property
  • The student discount – properties entirely occupied by students are exempt

There are also many categories of people who attract a ‘discount disregard’ for council tax purposes: for instance, severely mentally handicapped people, carers, and students. In essence, they are not counted as living in the property for council tax purposes. This means that, in a property where one person is liable and two are students, a single person discount would apply, because one liable person lives at the property.

Council tax support

Councils are required to operate a system of ‘council tax support’, for taxpayers of limited means. This replaced council tax benefit in 2013. Eligibility for the council tax support scheme varies from council to council.

Eligibility may be linked to the other benefits that the constituent receives.

Empty properties and second homes

Exemptions for empty properties

Since April 2013, local councils have had the discretionary power to charge 100% of council tax on empty properties (‘unoccupied and substantially unfurnished’ properties). Prior to this, empty properties were exempt from council tax for six months. Many councils no longer offer any discount on properties in these categories.

What is the empty homes premium?

Since April 2013 local authorities in England have been able to set an ’empty homes premium’. Councils have the power to charge up to 200% of the council tax bill on a property that has been empty for two years or more. Additional premium levels of 300% where a property has been empty for five years, and 400% for a property that has been empty for ten years, will be introduced in 2020 and 2021 respectively.

This power applies from when the property became empty: someone who buys a property that has already been empty for two years may find that they face this charge immediately.

The purpose of this, according to government guidance, is to encourage empty properties to be brought back into use.

Occupying the property for a period of over six weeks would ‘reset the clock’ for the purposes of the premium.

Council tax and second homes

Council tax becomes more complex where a person lives in, or owns, more than one property. Council tax law is based on the concept of the ‘sole or main residence’. This is the place where an occupant lives in practice. However, it may also denote a property that a council tax-payer has access to, although they may not live there full-time.

For instance, case law has established that when an individual in the Armed Forces lives on an army barracks but also has a family property elsewhere, their family property is their ‘sole or main residence’ and they are liable for council tax in respect of it.

A constituent who owns two properties, spending some time in both, will be liable for council tax in both locations. But s/he would only be able to claim (for instance) a single person discount in respect of their sole or main residence. Council tax law would regard the other property as an ’empty property’.

Council tax and annexes

Annexes that can be used separately from their ‘main house’ will be given their own council tax banding. However, they attract mandatory discounts where the annexe is occupied by a relative of the occupants of the main house, or where it is being used as part of the main house.

Council tax in Scotland and Wales

The council tax system is a devolved matter in Scotland and Wales. While the principles of council tax are the same in England, Wales and Scotland, there are differences in the detail and operation of the system in each country.

Further information on council tax in Scotland and Wales is available in a Library Briefing. Although this briefing mainly focuses on the council tax system in England, it includes references to Scotland and Wales when they diverge from England.

Council tax in Northern Ireland

There is no council tax in Northern Ireland; a domestic rating system is in operation there.