Council tax is mandatory upon adult residents of a property. Through this blog post, we will explain how council tax is calculated for new builds as well as the valuation bands applied on council tax. Additionally, we will also discuss how council tax bills are paid and the consequences of not paying your council tax.

How Is Council Tax Calculated On New Builds?

Council tax is due on new builds from the Completion Date onwards. It is the builder and the buyer’s (if both are separate) responsibility to inform local council authorities of this date as well as the current value of the property.

Local council authorities then inform the Valuation Office Agency. The Valuation Office Agency (VOA) initially assesses the market value of properties according to their worth in 1991 (this is a uniform practice across the UK) to assign them a valuation band. If your property has been constructed after 1991, the market value of similar properties at that time will be applied.

While the valuation process takes its due time, the local council authorities assign a council tax number to the owners.

There are eight valuation bands for council tax bills that run across A to H, with Band A assigned to properties with the lowest value and increasing up to Band H for properties with higher values. It is on the basis of this assigned band, that the amount of council tax is decided. Therefore, the higher the valuation band, the higher the council tax payments.

The same bands are applied whether a property is a new build, is being re-assessed after renovations or an extension.

Below is a detailed classification of council tax rates according to their valuation bands:

Council Tax BandProperty Value
AUp to £40,000
BOver £44,000 and up to £52,000
COver £52,000 and up to £68,000
DOver £68,000 and up to £88,000
EOver £88,000 and up to £120,000
FOver £120,000 and up to £160,000
GOver £160,000 and up to £320,000
HOver £320,000 

For an average property of Band D, the highest council tax is currently being paid by residents in Nottingham in England for £2,226, while the residents in Westminster pay the lowest rate of council tax at £829. The reason for this variation in amounts is the fact that each local council office sets its own council tax rates to bands due to which different people across the council will pay a different amount of council tax for the same valuation band. This is also one of the reasons why some individuals may feel that their council tax bill is too high.

In addition to a property’s value, the Valuation Office Agency considers the following factors when assessing a property for valuation purposes:

  • location
  • size
  • character
  • layout
  • purpose or use

When Does Council Tax Run From?

Council Tax bills are payable from the start of the financial year in April with 10 monthly instalments concluding in January. While councils maintain February and March as tax-free months to collect payments that were not made in time; those liable to pay council tax bills may request their local council for 12-month instalments to make payments convenient by reducing the amount of each instalment.

Essentially, your council tax bills indicate the following three areas:

  • the total amount due for the entire year
  • how the annual amount has been worked out by the local authorities
  • the dates are payments will be due

A standard bill is spread over 10 monthly instalments that run between April and January. However, if residents find it difficult to make timely amounts as per the monthly amount that is due, they can request their local council to divide this annual tax into 12 instalments; thus, reducing the size of the monthly instalment.

It must be remembered that you may not receive the same amount of council tax bill as another person living in your council. This is a property-based tax that varies depending upon the value of the property. 

Also, each council designs their council tax scheme. This means that your bill may be different as compared to another individual living in a different council. 

What Happens If Someone Is Unable To Pay Their Council Tax?

If an individual is struggling to pay their council tax bills, they must contact their local council office immediately. The first convenience extended to such individuals is that the local council may allow them to pay their council tax bill in 12 instalments as compared to the standard 10. This reduces the amount that is due each month; thus reducing the size of each payment.

If this is not a workable solution, the council office may offer the individual a one time discount so that future payments are made easily.

If someone is low on income or receiving other forms of state benefits, they may not be eligible to pay their council tax in full.

However, if someone deliberately fails to make their council tax payments and does not inform the council of their situation, they will be sent a reminder notice to clear their payment within the next 7 days. Failure to do so may impose the full payment of the annual tax on the individual.

Continuing to miss council tax payments may call for legal action from the council’s side as they will be authorised to send a liability order (a legal demand) to clear your unpaid dues. All legal fees incurred for this process will be added to the defaulter’s council tax bill.

As a final resort, the council office can send enforcement agents/bailiffs to seize the property of the defaulting party. If someone does not have a good reason to default on their council tax payments, they may be sent to jail for 3 months. 

What Is The Amount Of Council Tax Collected In A Year? 

According to statistics released by the Department for Levelling Up, Housing and Communities, local authorities collected a combined sum of £32.2 billion as council tax during 2020-2021. This amount is not year specific and may include arrears from previous years as well. 

While it is an increase of 1.9 per cent or £0.6 billion from the previous year, it must be noted that the amount is much less as compared to previous years since the UK Government had extended many support programs post covid-19 due to which the number of collections, as well as the amount collected per collected, have decreased.  

It should also be noted that this amount shows a 95.7 per cent collection rate by local authorities. The remaining amount is considered as arrears in council tax bills and is yet to be collected from residents.

Will Council Tax Rise In 2022?

Yes, as per estimates of the Institute for Fiscal Studies that appeared in Council Tax set to rise by £100  and Council tax could rise by £220, council tax is expected to rise by a minimum of 3.5 per cent or £100 annually over the next three years. This is, however, the minimum estimate as the rates could go up to the maximum ceiling of a 5 per cent rise.

The main reason for this increase in council tax is being cited as the underfunded social care schemes announced by the government. The social care system which aims to support and assist the elderly and disabled with everyday tasks has been under question for a long time due to a lack of government funding and much needed structural reforms. It is estimated that there are around 1.5 million people in need of social care but lack access to it since it is means-tested.

The said scheme is expected to cost around £5 billion annually. 

Conclusion:

From the above discussion it is clear that council tax is applied on new builds on the basis of an estimate of their market value in the same way as it is applied for older properties. The same valuation bands are then applied and council tax bills commence from the completion date onwards. Residents can choose to pay their council tax on a monthly basis through 10 instalments, or through an annual lump sum payment to local councils.

FAQs: How Is Council Tax Calculated On New Builds?

How do I avoid council tax in the UK?

You cannot avoid council tax in the UK as it is a mandatory payment made to local councils. However, should you be eligible for a council tax reduction due to certain circumstances, you can apply for a discount at your local council office.

Why is council tax so high?

While council tax rates have been increasing over the years, sometimes due to inflation and at times due to reduced government spending; however, some people will find their council tax to be higher than others. The reason for this is the valuation band assigned to your property due to its market value.

How is council tax paid?

Council tax is paid through 10 monthly instalments every year. If you pay via a direct debit facility, you can do so between the 1st, 8th, 15th or 22nd of each month. You can also pay council tax bills through online transfer, debit or credit card or a cheque.

Do pensioners pay council tax in the UK?

Yes, pensioners do pay council tax in the UK. However, depending on their situation such as living alone, they will be eligible for a discounted rate on their council tax bill.

Do you pay council tax on an empty property?

If a property is lying empty due to the owner being in hospital care or prison, it will be exempted from council tax bills. However, if you leave a property unoccupied, especially for more than a year,  you will have to pay a council tax premium on the property.

References:

How domestic properties are assessed for Council Tax bands – GOV.UK

Council Tax banding and new build properties

Council tax for new builds

Council tax bands – Which?

Council Tax: what it is, what it costs and how to save money

Council Tax: Paying your bill – GOV.UK (www.gov.uk)

Paying your Council Tax (merton.gov.uk)

Council tax bills can be spread over a year from April (moneysavingexpert.com)

Frequently asked questions about Council Tax (chesterfield.gov.uk)

Council tax could rise by £220, say researchers – BBC News

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