Council Tax Rises: Impact Of Funding On 6 London Councils
How much is Council Tax going up, and why do households still face higher bills despite the increased government funding? Across the UK, councils are planning council tax rises of 5% because rising service costs put pressure on local budgets. In this article, Real Estate Agents London explains which councils are winners or losers after the funding announcement, and what is the impact on the tax rate?
Recent Government Funding Announcements And Their Impact On Council Tax Rises
The UK Government has announced £68-69 billion in funding for councils, which is around 6-7% more than the previous year. This means approximately £5 billion extra is available to spend on local services such as waste collection, libraries, and community support.
Multi-Year Funding Settlement
The government has also announced a Three-Year Funding Settlement with councils to provide more financial assurance. This table highlights the 23.6% increase in funding as compared to 2024-25.
| Year | Government Money | Extra Needed from Council Tax? | Increase Vs Previous Year |
| 2024-25 | £68 billion | High (shortfall) | – |
| 2026-27 | £77.7 billion | Still some shortfall | 14.3% |
| 2028-29 | £84.6 billion | Fewer shortfalls, but may still raise taxes | 8.9% |
Why Funding Cannot Stop Council Tax Increases
Even with the increased funding, many councils are raising the tax rate, because of the following reasons:
- Unequal Distribution of Funds: Some councils receive more money than others, which creates inequality. Authorities in low-funded areas increase local taxes to cover service costs.
- Rising Costs of Local Services: Inflation, higher wages, and increased demand for adult and children’s social care mean that even extra government funding can’t fully cover these expenses.
- Pressure on Essential Services: Councils need to maintain libraries, waste management, bin collection, community hubs, and youth centres. Without raising taxes, these services cannot be performed on time.
- Regional Inequality: Some councils raised concerns about discrimination that a few areas are at a disadvantage in terms of funding. Due to this, residents may face higher council tax bills and Capital Gains Tax when selling property in areas with high property values.
Purpose Of The Government Funding
The new funding aims to:
- Restore local services overall, such as libraries, youth centres, and community hubs.
- Replace the outdated funding system with a fairer and need-based approach.
- Provides financial certainty to councils, enabling them to plan budgets more effectively.
Which Councils Will Receive More Funding?
All Councils will not receive the same funding, as it is based on factors such as local needs and deprivation levels.
Northern and Deprived Areas
Most deprived councils will receive 23-24% more funding than less disadvantaged areas. They can improve services with this extra money, such as housing, social care, and community support.
London and Southern England
London boroughs and southern councils may receive additional funding to cover the higher costs of living in the UK, staffing, and service delivery. Authorities struggling with rising demand for adult social care, children’s support, and community programs also receive extra financial support. Due to higher operating and staffing costs, many developments in London benefit from structured Residential Block Management to maintain service standards despite rising council tax bills.
Councils Allowed to Exceed the Cap
Some councils receive permission to raise council tax above the 5% limit without a referendum. These include Kensington and Chelsea, Westminster, Wandsworth, Hammersmith and Fulham, City of London, and Windsor and Maidenhead.
How is Council Tax Calculated?
Council Tax rises can be calculated based on these key factors:
- Annual Increase Limits: Councils can raise council tax by 3% each year, plus an extra 2% for adult social care.
- Property Bands: Homes are placed into bands (A-H) based on their values, which can affect how much tax you pay.
- Local Council Decisions: Each council sets its final tax rate within the government’s referendum threshold.
Conclusion
The Government’s Three-Year Funding is designed to provide financial stability and support deprived areas by improving their local public services through councils. However, rising service costs, inflation, and growing social care demand mean that many councils are still facing budget pressures. As a result, Council Tax Rises cannot be avoided in the coming years.
Frequently Asked Questions
Yes, but only in exceptional cases. For Example, some councils are capped at a set 5% limit, but a few London councils have permission to raise above this limit. Exceptional councils include Kensington and Chelsea, Westminster, Wandsworth, Hammersmith and Fulham, City of London, and Windsor and Maidenhead.
Property band directly impacts how much tax you will pay. Each home in the UK is assigned a specific tax band (A-H in England) based on its value. For Example, if your property is in the lower band, you pay the lowest bill, while homes in the higher band pay the highest bills.
No, the Government raise funding based on deprivation level, local needs, and service costs. So some of them receive more money than others.
Each year, the UK Government sets a Referendum threshold for the council tax increases. Local authorities determine their new tax rate based on these limits set by the government and require approval to increase the tax above these limits.
No, you cannot legally refuse to pay council tax or receive a claim. This is a legal obligation in the UK for all residents. Otherwise, the authorities can take enforcement action against you.
Single occupants, or persons living in the home with no other adults, are eligible for the 25% discount on council tax. This is also known as a single-person or single-occupier discount.
The council tax rate will likely go up instead of decrease this year. Because instead of the announced funding settlement, councils still cannot fully cover local services expenses due to rising costs and economic changes in the UK.
The Government will introduce the biggest changes in the Children’s social care generation, with an investment of £2.4 billion over the multi-year Settlement.
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