Pensions tax
This briefing gives an overview of pensions taxation in the UK.
A briefing note on rises in council tax for 2021-22, for the Opposition Day debate scheduled for Monday 25 January 2021
An Opposition Day debate on anticipated rises in council tax in the 2021-22 financial year is scheduled for Monday 25 January 2021.
This note provides some brief information about council tax, the rises anticipated for 2021-22, and links to additional resources.
In England the average band D council tax bill for 2020/21 was £1,818; a rise of 3.9% on 2019/20.
As the chart below shows, council tax levels fell in real terms (adjusted for inflation) during some years in the early 2010s. Freeze grants were paid to local authorities that froze or reduced council tax between 2011/12 to 2015/16. From 2016/17, authorities have been given flexibility to increase council tax by an additional amount to fund adult social care.
MHCLG publish live tables on council tax. The tables allow users to pick an authority to see how council tax levels have changed there since 1993.
On 17 December 2021, MHCLG published the provisional Local Government Finance Settlement for 2021-22. This included the ‘council tax requirement’ for each local authority in that year.
The council tax requirement represents an estimate of the amount of council tax that could be raised by a local authority. MHCLG’s assessment of the council tax requirement, in the finance settlement documentation, is based on two key assumptions:
If both of these assumptions hold, the amount of council tax raised by each class of authority in 2021-22 would look like this relative to the current year:
This shows that the amount of tax raised across England as a whole would be expected to rise by 6.6%, but that the different classes of authority would raise very different amounts. Shire districts would have the lowest increase, at less than 1%, while unitary authorities and metropolitan districts would have the highest at over 10%.
The current local government finance settlement comes in a context where central Government funding of local authorities has decreased considerably in recent years.
The grey lines in the charts below correspond to every local authority in England which received funding every year from 2015-16 to 2021-22. They show each authority’s funding and core spending power (an estimate of the amount of money that local authorities are expected to have available to take decisions, including council tax) as a proportion of their respective levels in 2015-16.
Note: The grey lines represent every local authority in England where we have a figure for settlement funding in each year from 2015-16 to 2021-22. The median line indicates the authority in the middle of all authorities (when ranked by indexed funding/spending power) for that year – it does not follow the same authority across all years.
Source: MHCLG, Local government finance settlement: England, 2021 to 2022, 17 December 2020
This shows that all local authorities had funding levels in 2020-21 that were lower in real terms than in 2015-16. Because of the way public services are delivered changed considerably during the pandemic (and is expected to change again as restrictions ease), we cannot meaningfully provide real-terms figures for 2021-22; however, we do know that settlement funding to most authorities will be very similar in cash terms to its level in 2020-21.
There is considerably more variation in core spending power among authorities than in settlement funding, but most were still well below their 2015-16 levels in real terms in 2020-21.
Local authorities in England must hold, and win, a local referendum in order to raise council tax by amounts that are greater than thresholds set each year by the Government.
Details of the council tax referendum system can be found in the Library briefing paper Council tax: local referendums. This provides details of the exact thresholds applying in 2020-21 and 2021-22, and in previous financial years.
In recent years, most referendum thresholds have been in the order of 2% or 3%. Since 2016, upper-tier authorities (county and unitary councils) have also been permitted to raise a ‘social care precept’, again typically 2% or 3%.
In the provisional local government finance settlement for 2021-22, the Government announced that local government’s spending power would rise by 4.5%. Some 87% of this increase would come from increases in council tax: local authorities are not in fact required to make these increases. This issue is discussed at greater length in the Institute for Fiscal Studies’ briefing note Assessing England’s 2021-22 Local Government Finance Settlement, and it is also mentioned in the Local Government Association’s Provisional Local Government Finance Settlement 2021-22 On the Day Briefing.
The coronavirus pandemic continues to affect the UK. The Labour Party argue that council tax shouldn’t increase while the pandemic continues to cause economic uncertainty.
The Library has published many briefings on the coronavirus. They are all avaiable from the coronavirus hub. The following focus particularly on the economy, labour market and households finances:
Both the Institute for Fiscal Studies (IFS) and Resolution Foundation (economic think-tanks) have reported on household incomes during the pandemic; for instance:
This briefing gives an overview of pensions taxation in the UK.
Looks at the Labour government's proposals on independent schools, VAT and charitable (business rates) relief
The single person discount on council tax means people living alone pay less council tax. Average council tax per person would fall if the discount were removed.