Council Tax - Structure

What is Council Tax?

Local government is financed by a combination of centrally-administered funding and locally-administered charges and taxes - the most significant of which is council tax.

Council tax combines elements of both its predecessors: the property-based rates system that existed until 1990 and the community charge or 'poll tax' on individuals, which existed from 1990 to 1993. Council tax has both a property value element and a personal element.

People's council tax liabilities depend on which 'band' their property is in, the number of council tax payers in the local authority's territory (the council tax base), how much the local authority intends to spend that year and the funding it has been allocated from central Government.

'Collection authorities' include unitary authorities, London borough councils, metropolitan borough councils, and shire district and borough councils. In two-tier areas, the district council collects council tax to pay for its own services and to cover the precept issued by the county council and any relevant parish or community council for the services they provide.

Precepts are also added to people's total council tax bills by the local Police Authority and any relevant Fire and Civil Defence Authority.


Council tax was developed as a replacement for the community charge, whose turbulent three-year history was extremely unpopular and difficult to administer.

The so-called 'poll tax' - a term first used in the context of 1381's Peasants' Revolt, the 'poll' meaning 'head' - was introduced by the Thatcher Government to correct the weaknesses of the domestic rates system.

By taxing people rather than property, the community charge taxed large numbers of people previously excluded. Only about 25 per cent of local people were issued with bills under the rates system, but the new system charged adult children living with parents, lodgers etc. Some steps were then taken to mitigate the regressive effects of the community charge by a series of discounts and exemptions.

However, there was considerable public opposition to the poll tax and many people refused to register to pay it. Although houses were immobile, people were not, and keeping track of citizens' movements - particularly in cities - combined with widespread protests that occasionally broke into rioting, made the system unworkable.

One of the first significant reforms of the Major Government was to replace the community charge with council tax, which combined a 50 per cent property and a 50 per cent personal element, thereby avoiding the worst excesses of both the preceding systems.


Unlike the community charge, the council tax system was initially widely accepted. But accelerating increases - reaching an average 12.9 per cent in 2003 - have led many to call for its replacement. Indeed, a 2003 report by the Audit Commission described the local government funding system as "fundamentally flawed".

Local authorities frequently accuse the Government of underfunding them through central grants while imposing additional duties that they must fulfil - requiring councils to put up council tax to meet objectives they have not been involved in setting.

Even so, most opposition to council tax arises from its level - and by extension the local government funding settlement - rather than a perception of intrinsic unfairness. However, accelerating levels have hit people on low or fixed incomes, such as pensioners, the hardest.

As a result the Government announced in July 2005 that eight local authorities in England would have their budgets capped and would need to set lower council taxes for that year. Local Government Minister Phil Woolas stated: "Given that we have increased funding to local government by 33 per cent in real terms since 1997, and that all authorities have received formula grant increases either in line with or above inflation in all of the last three years, there is no excuse for excessive council tax increases."

In June 2006 Mr Woolas warned that the Government expected an average council tax increase in England of less than 5 per cent in 2007/8. He added: "Authorities should remain in no doubt that the Government will not hesitate to use its capping powers to deal with excessive increases in future years, including requiring them to rebill, if this proves necessary."

And true to its word the Government announced in June 2008 that it would take action to tackle excessive council tax rises set by eight authorities for 2008/9.

Following the 2010 election, the new Coalition government promised to "freeze council tax in England for at least one year, and seek to freeze it for a further year, in partnership with local authorities."

Subsequently a £650 million funding pot was set aside to support councils willing to freeze or reduce their council tax charge. The Government said that as council tax had more than doubled since 1997, ministers were "determined to protect hard-working families and pensioners on fixed incomes."

In March 2011 it was confirmed that every English council had taken up the Government's offer of support; 378 authorities had been able to freeze their council tax for the period 2011-12 and 43 had reduced it.

A further £675 million was set aside by the Government to help local authorities keep their council tax bills down for the following year. In January 2012, Local Government Secretary Eric Pickles announced that 152 councils had already signalled their intention to freeze council tax for 2012-13 and he fully expected that number to increase.

The property valuation bands have also caused some controversy. Currently based on 1991 property prices there have been spasmodic calls for a revaluation to be carried out. The previous Labour government indicated that it would reassess the bands, but in the event decided to wait until after the general election. The Coalition has stated that it will not revalue during the lifetime of this Parliament.


The property valuation bands for England are:-
Band A Up to £40,000
Band B Over £40,000 and up to £52,000
Band C Over £52,000 and up to £68,000
Band D Over £68,000 and up to £88,000
Band E Over £88,000 and up to £120,000
Band F Over £120,000 and up to £160,000
Band G Over £160,000 and up to £320,000
Band H Over £320,000
Each property is valued at April 1991 prices

Source: Source: Directgov - 2012

Council tax bills hit £1,439 on Band D in England in 2010-11. This year, 2011-12, the average Band D bill set by local authorities remained at £1,439.
In London it was £1,308; in metropolitan areas it was £1,399; and in shire areas it was £1,484.
Council tax was £688 in 1997-98. This means council tax has risen over one hundred per cent - or an extra £751 a year on a Band D home.
Since all other Bands are set as a percentage of Band D, homes in every band have seen their bills double.

Source: Department for Communities and Local Government - January 2012


"I would like to congratulate the 150 or so local authorities, which have already signalled their intent to freeze or cut council tax this year…..

"Every councillor still to decide has an obligation to keep the living costs of their residents down and take the freeze money. A vote against a freeze is a vote for a punitive tax-rise when typical bills are already around £120 a month."

Local Government Secretary Eric Pickles - January 2012

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