Tax hacks: how to cut the cost of council tax

In Tax Hacks, our columnist Mike Warburton – previously a tax director with accountants Grant Thornton – brings you his best tax-saving tips. 

This tax year HM Treasury will collect more from council tax than from capital gains tax, inheritance tax, fuel duty and alcohol duty combined.

Despite this being a substantial outgoing, many of us do not know how the tax is worked out or how to reduce it. Last month it was revealed tax on typical Band D properties will rise by about 4.4pc, well above inflation.

Rates vary widely across the country and it is worth checking how you will be affected by using the calculator in his article. I will concentrate on England and Wales. Scotland and Northern Ireland have different rules.

There are essentially three ways in which you may be able to reduce your bills;

  • Claiming a discount
  • Appealing to change your council tax band
  • Claiming Covid relief

Discounts that may be available

  1. If you live alone you can claim a 25pc discount
  2. Students are not liable, nor are they counted in the single person discount
  3. Carers and those with a severe mental impairment are not included in the assessment
  4. If you have a low income and you and your partner have savings and investments of less than £16,000
  5. If you receive the guarantee pension credit you may be fully exempt
  6. Homes that have been adapted or are larger to accommodate someone with a disability
  7. If your home is empty because you moved into hospital, a care home or to live with a friend or relative who now cares for you
  8. There is no council tax due if the property is empty following death and for six months after probate is granted
  9. If the property is empty to allow major renovations to make it habitable

If you have a holiday let which meets the qualifying conditions you will be entitled to claim business rates apply rather than council tax. This can include the small business rates relief exemption which applies in over 96pc of cases.

In my view the recent Government announcement on holiday lets is not so much a clampdown as enforcement of the existing legislation. This is a column to help you find ways of saving tax, but only through a proper application of the rules.

I expected the Government to go further and remove the business rates exemption for holiday lets altogether at a time when many councils are desperately short of funds.

Changing your tax band

It is an accident of history we have eight council tax bands in England and nine in Wales, in each case based on property values for April 1991 in England and April 2003 in Wales.

In 1991 there were insufficient resources to produce detailed valuations. Agents frequently drove slowly along the road with a colleague noting down valuations without even stopping the car. These rough and ready “second gear valuations” inevitably gave rise to anomalies, many of which have stuck to the present day.

You are entitled to have your band reassessed by making an application to the council within six months of buying the property by asking the Valuation Office Agency to review the position. You can also do this if significant changes have been made to the property since it was last assessed.

This is not without risk because the VOA may decide your property should be in a higher band. If you live in a street with similar properties this could trigger a revaluation for all your neighbours which would not make you popular. 

The procedure to follow is set out in this link: Challenge your Council Tax band.

Because of the risks you should do some preparation:

  1. Check your band with the neighbours either by asking the Valuation Office Agency
  2. If you bought after 1991 start with that number
  3. With older purchases estimate the current value of your home. You can search property websites such as Rightmove or Zoopla to find recent selling prices in your area
  4. Work back to the 1991 value (2003 for Wales) by using the tables available through Nationwide or the Land Registry websites. Remember improvements made after 1991 such as an extension or loft conversion will still add to the value used to assess your band
  5. Check which band would have applied in 1991
  6. If you are confident your band is too high you can then follow the procedure above 

Covid relief

The Government has confirmed that as the pandemic runs into the 2021-22 tax year it will continue to support local authorities. This will allow claims to be made for council tax assistance from the hardship fund. Support is for households facing extreme hardship as a consequence of the pandemic. Support is discretionary and each council can decide how to allocate the funds available.

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