How is Council Tax Calculated?

Estimated reading time 9 minutes

Every year a new council tax bill appears through the letterbox and is often met with the question, “Why does it cost so much?” Often, you will have seen an increase each year. Sometimes small, other times, quite considerable. But how do they work it out and decide that you should pay that amount each month?

It all comes down to your property, and the funding the council need to help provide the services we all stand to benefit from. Each year, a council will plan its costings for the following year, once all sources of income are deducted such as fees, grants and business rates, a balance is left outstanding. This is the amount to be covered by council tax.

This remaining balance is then split across all domestic properties in the area with each being given a bill based on the property banding.

What is council tax?

You are likely aware of the bill but may not know exactly what it is for, let us explain. Council tax is a tax specific to the area you live in. Each household receives a bill that can be paid in a lump sum or over a monthly period. In many cases, the monthly payments are split over ten months rather than twelve, but you can ask your council for them to be split in either of these ways.

Each bill is assigned a property band from A-H and these bands are based on the value of the property as of 1st April 1991.

The tax covers the costs of local services such as rubbish collection, education, care services, police, and fire services and much more.

What are the council tax bands?

The bill you receive is based on the band your property falls into and regardless of whether your property was bought as a right to buy or bought via any other home discount scheme, the calculation will be worked out the same. No purchase discounts are applied to working out council tax banding.

This means, your council tax bill will fall into the bands shown below in line with the property valuation as of 1st April 1991.

Band April 1991 Value
A Up to £40,000
B £40,001-£52,000
C £52,001-£68,000
D £68,001-£88,000
E £88.001-£120,000
F £120,001-£160,000
G £160,001-£320,000
H Over £320,000

How is council tax worked out for newer properties?

Obviously, many properties have been built since 1991 and therefore only have a value from when they have been built and are fit for habitation. In instances like these, the VOA (Valuation Office Agency) will assess the property to see what band it should be given. These assessments will base the final banding on:

  • The size of the property
  • Its location
  • Its layout
  • Its character
  • Whether there has been a change of use (house to flats conversion for example)

To ensure a fair banding, your property will also be compared to equivalent properties in the area if it did not exist in 1991.

Should you move in and find that no band has been attributed to the property, contact your local council. They will then have the VOA carry out an assessment to ensure you are billed correctly going forward.

Do all homes pay council tax?

Every property that qualifies as a self-contained accommodation that can be used as a home will find itself given a council tax band. In some extreme circumstances, no band can be assigned to a property, but this is quite rare. If a property is occupied, the general rule is that it is habitable and given a banding.

Should you own a home that is not being lived in, there is an opportunity to have the council tax band assigned to the home deleted. This will only apply though if the property is either:

  • In such poor condition that any repair would give it a different character.
  • Undergoing such major works that the property is no longer habitable.

If either of these two circumstances arise, you can challenge the banding on the government website. This can result in its deletion although each challenge is assessed on a case-by-case basis. When a property has its band deleted, it is no longer eligible for council tax but once the property is bought back up to a suitable standard and becomes habitable again, it will enter the council tax listing on a band determined by the VOA.

Should your property have increased in size, its council tax banding may move upwards when it is next purchased. Likewise, a property may find itself assigned a lower banding should it have decreased in size or been partly demolished.

How do you know if you are in the right band for council tax?

Your council tax bill will explain the full amount owed, how it is worked out and what it covers. Should it seem unusually high, or even unusually low, you can challenge the band you have been given.

This can be a great way to have your bill recalculated to something more affordable, however, should the VOA deem your property to be worth more than first anticipated, you could find yourself put into an even higher band.

So, before you put yourself at risk of getting an even higher council tax bill, follow a few simple steps first:

  • Speak with your neighbours. If properties on the same road are the same age, size and type, you should all be on the same band and have the same bill. If your bill differs from theirs. You could have cause for challenging your new bill.
  • Next, you should check your property value.  Find the valuation from property portals that offer historic data. Rightmove for example. With this valuation you can then work out what your value would have been in 1991 using house price calculators. With this data, you can now see what band your property would have been placed in. This applies whether the house existed in 1991 or not.
  • With this information, if it still appears that your bill is wrong, you can make your challenge. If you believe the original valuation was wrong. Contact the VOA asking for a band review. Outline why you think it may be wrong. Should you think the band has changed since its first valuation, you should contact the council directly. They will either accept or reject your claim. You can appeal a rejection though via the valuation tribunal.

Improvements to your home will not see the band change but should the property be sold or be granted a new lease for more than seven years; you could find the band increase.

If you are in the process of buying a new home, you can check the VOA’s council tax list and see if your property is pending a band review.

Challenging your council tax band

Of course, noticing an error on your bill is deemed as a sufficient reason to challenge it and by following the steps above you may be able to mount a successful challenge but there are other reasons that are suitable for you to raise a challenge.

The VOA will accept the following as justifiable reasons to challenge your council tax banding:

  • There have been substantial changes to your property that have made it smaller or converted from houses to flats.
  • A change made to the valuation by the VOA has not been made.
  • The date of the change made by the VOA is wrong.
  • The property details are wrong or incomplete.
  • The property shouldn’t be on the list.
  • The valuation has been miscalculated due to a legal decision on another property.

You will not be able to challenge your band on the same grounds more than once unless there can be differing dates of those same reasons taking affect. For example, if the value of your property has been affected due to roadworks. You could submit one challenge for the works that started on one date and another for the works that started on a different date.

What if I have overpaid my council tax?

If your challenge results in finding that you have been on the wrong band, and as a result, overpaid, you will be refunded for any overpaid sums and have a new bill calculated at the correct, lower rate. If your challenge fails though, your bill will remain as it is. Unless they find that you should have been moved into a higher band.

Can I lower my council tax bill?

Should your challenge have failed, or you just feel your bill is unaffordable, you may be entitled to a discount. There are a few discounts available and, in some cases, full exemptions.

Discounts apply to people living by themselves, pensioners, those on low income and those categorised as disregarded. Discounts can vary with a single person discount saving 25% on a bill and somebody listed as disregarded saving 50% on theirs. Full-time students, people with severe mental impairments and those living in forces accommodation are among those entitled to full exemption.

How are HMOs banded for council tax?

In most cases, an HMO, or a house in multiple occupation would have originally existed as a larger house but has since been converted into providing multiple occupancy dwellings for residents. As a result, this means that each separate dwelling will receive its own council tax bill. However, in some instances, one council tax bill will be applied to the entire building. This happens when:

  • The HMO has had little, or no adaptation made. Door locks may have been added for example, but kitchens and bathrooms may be shared.

In HMOs where rooms have been adapted to feature their own kitchen or bathroom, a council tax bill will be applied to that living space regardless of whether other parts of the property are shared. In an instance like this, the VOA will assess whether the property has been structurally altered in such a way that it requires its own banding.

If you have found that even after a challenge, your council tax bill is high, contact Gaffsy. We can help you sell your house fast, guaranteeing you a quick house sale. This means you can move onto something much more affordable. Operating as a cash house buyer,  we make you an instant offer and can have the cash in your bank in as little as seven days. And, because we buy any house, anyone can sell their home to Gaffsy. Contact us today and let us help you sell your house fast

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