‘Excessive’ council tax hikes to be limited – but household levies will rise by £3,000
GB News: Expert discusses potential rise in Council Tax
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Council tax increases will be limited over the coming months as local authorities in England will receive £53.9billion in funding for the coming financial year, including more than £1billion of additional money for social care. Yesterday, the Government released details on a new package which delivers the largest cash-terms increase in grant funding for 10 years.
The new plans will prevent “excessive” council tax rises. The Government said residents will continue to have the final say over whopping council tax increases and from next year, the amount council tax can be increased without a vote will be two percent, with an extra one percent for councils with adult social care responsibilities.
The package makes an extra £3.5billion available compared to 2021-22, including a grant worth £822million for councils to spend as they see fit to best meet local needs.
Set out by the Department for Levelling Up, Housing and Communities, the funding released will enable councils to “continue to deliver vital services and look after the most vulnerable in their communities”
Michael Gove, the Secretary of State for Levelling Up, commented: “Councils continue to deliver for their communities and have a major role to play in our central mission of levelling up the country.
“Today’s funding package represents a real-terms increase from last year’s settlement and will make sure councils can improve vital frontline services, support vulnerable people and protect residents from excessive council tax rises as we build back better from the pandemic.”
On top of council tax and social care changes, the settlement will provide a range of support for Britons and the wider economy. This includes bonuses for new homes, services grants and support for rural areas.
Unfortunately, despite the Government’s efforts, tax bills are set to rise across the board in 2022 as state spending hits home. Sarah Coles, a senior personal finance analyst Hargreaves Lansdown, noted “nothing is certain in life, particularly in 2022” but she was “relatively certain” tax costs will rise over the coming year.
This not only includes council tax, but also taxes on income, capital and inheritances.
Ms Coles said: “The Resolution Foundation has calculated that by the end of this parliament, tax as a share of the economy will be at the highest level since 1950 – and up £3,000 per household since Boris Johnson became prime minister.
“Tax on pay will be responsible for the lion’s share of the increases, after income tax thresholds were frozen, and the Chancellor announced that 1.25 percentage points will be added to national insurance in April.
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“Tax on investments is also on the up. If you make more than £2,000 in dividends outside an ISA, you’ll face tax, and the Chancellor will hike the rate by 1.25 percentage points from April. And at the same time, the capital gains tax threshold has been frozen, so if you realise more than £12,300 in capital gains in a single year outside an ISA, you will pay tax.
“Inheritance tax is also set to rise, thanks to the freezing of the thresholds in the March Budget, and council tax is rising too, with the Budget allowing for a three percent increase.”
This will be disheartening for Britons who are already facing unprecedented tax bills. The latest HMRC tax receipt data for April 2021 to October 2021 showed £392billion was paid to the Government’s coffers, an increase of £99.8billion when compared to the same period a year earlier.
Specifically, inheritance tax (IHT) receipts rose by £600million, while Stamp Taxes and Annual Tax Enveloped Dwellings costs rose by £4.1billion.
Income Tax, Capital Gains Tax, National Insurance Contributions, and Apprenticeship levies combined rose by £31.1billion.
Myron Jobson, a personal finance campaigner at interactive investor, commented on these tax rises at the time.
He said: “The taxman secured a bumper haul in the first half of the financial year – but the figures are heavily distorted by the pandemic, as much of the economy ground to a halt last year because of COVID-19 restrictions.
“The increase in the Government’s IHT takings feels unsavoury in the context of the pandemic, and the freezing of the nil rate and residence nil rate bands until at least April 2026 means those bills look likely to keep rising, and increasingly feel like a raid on hard working families (who have already been taxed at the point of earnings), rather than the very wealthy it was originally targeted at.
“Stamp Duty continues to be a lucrative source of income for the taxman. The impact of the stamp duty holiday has been immense, pushing up the average house price to a record high of £270,000.
“Property transactions have gone through the roof as buyers rushed to get purchases ahead of the stamp duty holiday deadline at the end of September, after being phased out over the summer. Even in the absence of the stamp duty holiday carrot, there is still a healthy demand for property.”
Taking note of these changes is important as council tax specifically is a priority debt. This means it must be paid and the consequences of falling behind can be worse than with other debts.
Fortunately, where people may struggle with council tax obligations, help may be at hand. Local councils can be contacted for support when financial difficulty strikes and they may be able to set up certain payment plans. This can include payment holidays and bill reductions for people on benefits such as Universal Credit.
Additionally, as a result of the pandemic, this year the Government funded an extra £150 discount for people who qualify for council tax reductions. This will automatically apply to new claims, while existing claimants should have already received a new council tax bill to reflect this.
Worried taxpayers can also approach independent organisations for guidance. This can include Citizens Advice and Money Helper.
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