How the Major Council Tax Rises Would Impact You?

Do you own a residential property in the UK? You are now officially on the government’s radar due to the substantial Council Tax Rises announced in Budget 2025-26. To help us all get our heads on these pretty complex tax changes, EA Guaranteed Rent is here to break down the key findings for you.

Council Tax Rises in the UK 2025 Budget

Council tax is the primary source of locally raised income in England, Scotland, and Wales. Local authorities in England will charge an average of £2,280 for Band D council tax in 2025-26. This is £109, which is a 5.0% increase (£109) from 2024-25 and includes adult social care and parish charges.

Metric	2025–2026 Figure	Description
Standard Referendum Cap	5.00%	The maximum amount that most councils can raise taxes without a local vote.
Core Increase	3.00%	The standard maximum increase for general council services.
Social Care Precept	2.00%	An additional ring-fenced amount specifically for adult social care.
Average Band D Bill	£2,280	The national average for a standard Band D property.
Average Cash Increase	£109	The average annual increase per household compared to 2024–25

Most authorities have set the tax close to the maximum limit permitted without a referendum. This is not a one-size-fits-all tax, yet it is a tiered system, and it’s essential to know which band you fall into.

What is Council Tax and How is it Calculated?

The amount of the tax payable is based in part on the council tax band to which it is allocated. Every residential property in London is assigned to one of eight bands (A to H) based on the estimated value in April 1991.

Band A covers the cheapest properties, worth up to £40,000, while Band H applies to homes valued at £320,000 at that time. Band D council Tax is the standard to measure the council tax. All the other council tax bands are set on the proportion of D and are calculated by dividing the council’s total tax requirement by its council tax base.

Why Does Council Tax Have to Rise?

The main reasons for the council tax rise are given as:

Rising Costs for Essential Services

The service costs have gone up significantly, especially for adult care and children’s services. The demand and expenses are increasing day by day while facing inflation. The daily services, such as roads, parks, and waste collection, cost more to deliver.

Funding Gap between Income and Costs

The gap between funding and expenditure is rising constantly, even after cutting costs. The local councils predicted that these expenses would increase more in 2025-26 if it does not raise more revenue.

Council Tax Funds Most Services

The funds provided by the government to the council are not enough for all the services. Without increasing the tax, the councils say they would have to cut many services or reduce quality, which they want to avoid.

Areas Exempted From Usual Council Tax Cap (5%)

Labour has announced to provide special flexibility to six areas to their council tax rises above the normal limit (5%) without needing a local referendum for two years.

Kensington and Chelsea
Westminster
Wandsworth
Hammersmith and Fulham
City of London
Windsor and Maidenhead

Impacts of Council Tax Rises UK

The impacts of the rise in council tax in 2025 are:

Rising council tax is one tool, but it cannot meet all the needs without cuts or other funding.
The Local Government Association (LGA) states that an increase in council tax raises different amounts in different places and may leave little funding for other services once social care demands are met.
For renters, combined rent and a 5% increase on the existing council tax will make private renting less affordable.
Even the modest percentage rises add pressure as households already face high energy, food, and mortgage costs.

Final Thoughts

The council tax rises in 2025-26 represented a significant financial challenge for UK households. The cost is going up by £109, which is very tough to manage with existing expenses. Local councils say that they need extra funding to pay for important services, such as care for elderly people, roads, and rubbish collection.

Six areas in London can increase the tax without a referendum, which does not seem fair. The hard truth is that council tax will keep rising every year with increasing inflation and demand for services. For landlords, a corporate let or company let arrangement with guaranteed rent schemes like EA Guaranteed Rent London can help offset these rising costs with stable, reliable rental income. The best thing is to check your property band, explore corporate and company let options, and plan your budget carefully.

FAQs

Council Tax rises bill has risen for millions of households from 1 April, with most councils increasing their charges by 5%, adding roughly £109 to a typical Band D Bill.

In England, the permitted limit to increase the council tax is 5%. But some councils had been given permission to exceed this. In Scotland, there is no formal cap; local councils set their own cap.

Council Tax are proposed by local authorities, and approved by full council meetings, within limits set by governments. Major increases usually require government approval or a local referendum.

Historically, Nottingham City and parts of Dorset and Rutland have some of the highest council tax bills in England. This high council tax is largely due to lower government funding and higher service costs.

The six areas granted additional flexibility over council tax will be able to raise rates by more than 5% in 2026 and 2027. Council tax bills are likely expected to rise due to rising inflation, social care costs, and ongoing funding pressures

Council tax rises because demand for adult social care and children’s services keeps growing. Inflation is another cause, and government funding is not enough to keep pace with service costs.

Council tax is usually paid monthly over 10 months (April to January). Some councils offer 12-month payment plans.

Yes, it is mandatory to pay council tax in the UK if you are aged 18 and own or rent a home. Failure to pay can lead to court action, extra charges and enforcement measures.