COUNCIL tax bills are expected to increase at their fastest rate in 20 years following Rachel Reeves’ spending review.
This prediction comes from Paul Johnson, the head of the Institute for Fiscal Studies (IFS).
Johnson said that local government in England received “perhaps a little bit better than it might have expected” from the Chancellor’s statement on Wednesday.
However, he warned of a “sting in the tail” – the assumption that council tax bills will rise by 5% annually as part of the funding plan.
The core spending power of councils is set to increase by 2.6% a year from next year, and “if English councils do choose 5% increases – and most almost certainly will – council tax bills look set to rise at their fastest rate over any parliament since 2001-05″, Johnson said.
On Wednesday, Ms Reeves said that ministers will not be “going above” the 5% annual increases in council tax.
She told ITV: “The previous government increased council tax by 5% a year, and we have stuck to that. We won’t be going above that.
“That is the council tax policy that we inherited from the previous government, and that we will be continuing.”
The NHS was the biggest winner from Wednesday’s announcement, which allocated £300billion to public services.
Its budget will increase by £29billion a year in real terms.
Billions of pounds was also allocated to regional infrastructure projects, £39 billion was set aside for social housing, and defence spending was confirmed to increase by £11billion.
The Home Office will get less money in the coming years, even though there are promises to hire more police officers and reduce crime.
Treasury documents reveal that Home Office spending will drop by 1.4% per year between 2025-26 and 2028-29, one of the largest cuts among departments.
However, Reeves stated that police spending power would still rise by 2.3%, potentially through increased council tax, though the exact amount is unclear.
Johnson said yesterday on X (formerly Twitter): “Note wording on police funding. Increase in ‘spending power’ implies that higher precepts from local taxes will play their part.”
Ruth Curtice, head of the Resolution Foundation, echoed this view.
She pointed out that low and middle-income families had gained from the spending review, with the poorest fifth getting an average of £1,700 extra for services like schools, hospitals, and the police.
However, she warned that without economic growth, more tax rises could be on the way this autumn to balance the books.
This comes after the Office for National Statistics (ONS) revealed that the economy shrank more than expected in April, marking the biggest drop in 18 months.
GDP dropped by 0.3%, driven by a sharp decline in manufacturing and a record fall in exports to the US after tariff hikes by President Donald Trump.
Speaking after delivering her spending review yesterday, Ms Reeves insisted she would not have to raise taxes to cover her spending review.
What council tax support is available?
By James Flanders, Chief Consumer Reporter
There are several ways you can get discounts and reductions on your council tax bill.
In some cases, you can even get the bill completely wiped with a council tax reduction.
Factors such as your household income, whether you have children, and if you receive any benefits, will influence what you get. To apply, visit here.
You’ll need your National Insurance number, bank statements, a recent payslip or letter from the Jobcentre, and a passport or driving licence when filling out the details.
Below, we reveal all the ways you can get discounts or a reduction on your bill:
Single person discount
If you live on your own, you can get 25% off your council tax bill.
This also applies if there is one adult and one student living together, or one adult and one person classed as severely mentally impaired.
If you live with someone who doesn’t have to pay council tax, such as a carer or someone who is severely mentally impaired, you could get a larger reduction too, of up to 50%.
And, if you live in an all-student household, you could get a 100% discount.
Retirees
Pensioners may also find themselves eligible for a council tax reduction.
If you receive the Guarantee Credit element of Pension Credit, you may not have to pay a penny.
If not, you could still get help if you have a low income and less than £16,000 in savings.
And a pensioner who lives alone will be entitled to a 25% discount too.
Low-income households
If you are on a low income or receiving benefits, you could be eligible for a reduction on your council tax, depending on where you live.
You could also get a deferral if you’re struggling to pay your bill, or you can speak to your council about setting up a payment plan to manage the cost.
But one thing to remember is if you are struggling you should contact your council as early as you can.
How are council tax bills calculated?
In England, local authorities can increase council tax by up to 4.99% each April without holding a referendum.
This is broken down into a 2.99% increase for general spending and a 2% precept for adult social care.
Any increase above this 4.99% limit requires a local referendum to gain public approval.
In areas governed by ‘two-tier authorities’, where responsibilities are divided between two councils, your council tax bill is split into two charges – one set by your county council and another determined by your district, borough, or city council.
The proportion of your bill allocated to each council varies depending on the authority, though county councils typically claim the largest share.
District councils are permitted to increase their portion of the charge by up to 3% annually without the need for a referendum
However, these charges have been excluded from our dataset.
In addition to the above charges, your council tax also includes contributions towards local police and crime commissioners, fire and rescue services, as well as any applicable town or parish council charges.
Councils typically finalise their council tax increases by early March, with the new rates coming into effect from April 1.
Check if you can claim a council tax refund
Over three million households are owed a combined total of £544million in council tax refunds, according to a Sun investigation.
The average refund due is around £178, but some could be owed as much as £3,659.
Sun Money submitted a Freedom of Information Request to all 349 local authorities in England, Scotland and Wales to find out just how much taxpayer money our councils are sitting on.
You can check to see how much cash your local authority might be sitting on by searching for your council in our tool.
It’s surprisingly easy to overpay your council tax, and millions of us do.
One of the main reasons is moving house.
Council tax is usually billed annually from April to April, but paid in instalments, which means you’re always paying some in advance.
Therefore, if you move out before the year’s end, you’ll likely be due a refund for the remaining months.
Another reason for overpayments is a change in your property’s council tax band.
If the band is lowered, you’re due a refund for the over payments made at the higher rate.
Finally, forgetting to cancel your direct debit after moving out can lead to continued payments and further overpayments.
Finding out if you’re owed a council tax refund is easier than you think.
Many councils have online claim forms available on their website. To find your local council’s site, visit here.
You can also contact them directly by phone, email, or live chat.
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