What is council tax? Council tax is the local tax charged on homes in England, Scotland and Wales. It is paid to your local council and helps fund the local services that most households use every day, including refuse collection, libraries, local roads, parks, social care and schools. Unlike income tax, which is based on what you earn, council tax is based mainly on the property you live in, and on how many adults live there. Your bill comes from your local council, not from HMRC, and the amount you pay depends on three things: the valuation band of your home, how much your council charges for that band, and whether you qualify for a discount, an exemption or a reduction.

Every home that counts as a dwelling is placed in a council tax band. The band is set by the Valuation Office Agency in England and Wales, or by a local assessor in Scotland — not by the council itself. The council then decides how much to charge for each band in its area, usually once a year, and sends out the bill. That split matters: two identical houses in different council areas can have very different bills, because each council sets its own charge, and in many areas part of the bill is a precept that goes to the police and fire authorities. Your bill should show how the total is worked out and the dates on which payments are due.

Who has to pay council tax? GOV.UK says you will usually have to pay council tax if you are 18 or over. A full bill is based on at least two adults living in the home, and spouses and partners who live together are jointly responsible for paying it, which means the council can pursue either of them for the full amount. In practice the person who lives in the property pays: for most rented homes that is the tenant, and for a home you own and live in, it is you. If a property is empty, the owner is usually liable. The important point is that liability follows occupation of the home, so moving house, taking in a lodger or having someone move out can all change who is responsible and how much is due. If you are unsure who should pay, GOV.UK advises contacting your local council, and you should tell the council promptly when your household changes.

How the bands work. Bands are based on what a property would have sold for on the open market on a fixed date in the past: 1 April 1991 in England and Scotland, and 1 April 2003 in Wales. That is why a band does not reflect what your home is worth today. A home built last year is banded by imagining what it would have sold for in 1991, and rising house prices since then do not move a home into a higher band. In England there are eight bands, A to H. Band A covers homes valued at up to £40,000 on 1 April 1991, Band B covers £40,001 to £52,000, Band C covers £52,001 to £68,000, Band D covers £68,001 to £88,000, Band E covers £88,001 to £120,000, Band F covers £120,001 to £160,000, Band G covers £160,001 to £320,000, and Band H covers homes worth more than £320,000 on that date. Wales has nine bands, A to I, based on 1 April 2003 values, running from Band A at up to £44,000 to Band I at more than £424,000.

Band D is the reference point for the whole system. Each council sets its Band D charge for the year, and every other band pays a fixed proportion of it: in England, Band A pays six ninths of Band D, Band B pays seven ninths, Band C pays eight ninths, Band E pays eleven ninths, Band F pays thirteen ninths, Band G pays fifteen ninths and Band H pays eighteen ninths, which is exactly double Band D. So if a council set its Band D charge at £2,000 for the year as an illustration, a Band A home would pay about £1,333 and a Band H home would pay £4,000. Your actual bill will be different, because it depends on your own council's Band D figure, but the proportions between bands are fixed in the same way. You can check your own home's band free of charge through the GOV.UK council tax band service, using your postcode, and you can look up the bands of neighbouring homes in the same way.

The 25% single-person discount. The discount most people miss is the single-person discount. If you live on your own, you get 25% off your bill. You also get 25% off if everyone else in your home is disregarded for council tax purposes, even if other people live there. GOV.UK lists the people who are disregarded when counting the adults in a household: children under 18, full-time students, student nurses, people on certain apprentice schemes, 18 and 19 year olds in full-time education, people under 25 who get funding from the Education and Skills Funding Agency, foreign language assistants registered with the British Council, live-in carers for someone who is not their partner, spouse or child under 18, diplomats, and people who are severely mentally impaired. If everyone living in your household is disregarded, you get 50% off the bill. You need to apply for a discount or an exemption even if you are disregarded — the council will not always know your circumstances, and a discount given by mistake must be reported to the council, or you could be fined and asked to pay the money back.

Discounts for full-time students. A household in which everyone is a full-time student does not have to pay council tax at all. To count as a full-time student for this purpose, your course must last at least one year and involve at least 21 hours of study a week. If you are studying for a qualification up to A level and you are under 20, the course must last at least three months and involve at least 12 hours of study a week. If you do get a bill even though everyone in your home is a full-time student, you can apply to your council for an exemption. In a mixed household — for example one working adult living with a full-time student — the student is disregarded, so the household usually qualifies for the 25% discount instead of a full exemption. Students should ask their college or university for a council tax exemption certificate if the council asks for proof.

Discounts for disabled people. If you or someone you live with is disabled, you may be able to pay less. Under the Disabled Band Reduction Scheme, you may qualify if you live in a larger property than you would need if you or another occupant were not disabled — for example because you have an extra bathroom, kitchen or other room that the disabled person needs, or extra space inside the property for using a wheelchair. If you qualify, your bill is reduced to the next lowest band: a Band D home pays the Band C rate. If your home is already in the lowest band, Band A, you get a 17% discount on your bill instead. The property must be the main home of at least one disabled person, who can be an adult or a child, and does not have to be the person responsible for paying the tax.

There are also discounts for people who are severely mentally impaired. You will need a certificate from a medical professional, such as your GP, saying that you are severely mentally impaired, and you will need to prove eligibility for certain benefits, so check with your local council what evidence it needs. If you qualify as severely mentally impaired and you live on your own, or every other adult in your household also qualifies or is a full-time student, you get a 100% discount, which means no council tax to pay. If everyone else in your household is disregarded, the discount is 50%. If you live with someone who qualifies as severely mentally impaired and there are no other adults in your household, or everyone else is disregarded, you get a 25% discount.

Council Tax Reduction for low incomes. If you are on a low income or you get benefits, you may be able to get Council Tax Reduction, which used to be called Council Tax Benefit. This is different from a discount: it is based on your income and circumstances rather than on who lives in your home. Each council runs its own scheme, so the amount you can get, and who qualifies, varies from area to area — some councils reduce the bill to nothing for the lowest-income households and pensioners, while others offer a smaller percentage reduction. Apply through your local council, and be ready to give details of your income, savings and household. If your circumstances change, tell the council straight away, because a reduction can be recalculated and overpayments can be recovered.

Second homes and empty properties. You will usually have to pay council tax on a second home, such as a holiday home, and your council decides whether the property is a second home and how much to charge. The council may give a discount, but it can also charge a premium of up to twice your normal council tax. There are exceptions: an annexe that forms part of the same property and is used as part of the main residence, a home provided by your employer that you need to live in for your job, and a second home with planning restrictions that mean you cannot use it as a permanent residence may not have to pay the premium. You may also escape the premium for up to 12 months if you recently received a grant of probate for the property or if it is being marketed for sale or to rent. Empty homes are treated in a similar way. You will usually have to pay council tax on an empty home, although the council can decide to give a discount, and if the home has been empty for at least a year you can be charged an empty homes premium. How much extra you pay depends on how long the property has been empty, and it can be up to four times your normal bill if the home has been empty for at least 10 years. Again there are exceptions, including annexes and homes left empty because the owner is in the armed forces and has had to move into service accommodation, and the 12-month exceptions for probate, marketing and major repairs. A home left empty because its owner has died does not attract council tax until after probate is granted, and after probate you may be able to get a further exemption of six months if the property stays unoccupied and is still owned in the name of the person who died. Some homes never get a bill while they stay empty, including homes of someone in prison, someone who has moved into a care home or hospital, repossessed homes, homes that cannot be lived in by law, and homes that have been compulsorily purchased and will be demolished.

Paying your bill. Your council tax bill tells you how much you have to pay for the year, how that amount has been worked out and the dates you have to pay. The cost is usually split into 10 monthly payments, but if you are having trouble paying, contact your council immediately — it can help, for example by spreading your payments over 12 months instead of 10. You can usually pay online, and you can also use PayPoint, Payzone or Quickcards for cash payments at post offices, banks, newsagents and convenience stores. Check your bill for the other payment methods your council accepts. If you think you have overpaid and have not received an automatic refund, contact your council. Do not simply stop paying: the council can take action to recover unpaid council tax, so talk to it early if money is tight.

Challenging your band. If you think your home is in the wrong band, you can challenge it, and it is free to do so through the Valuation Office Agency. Start by checking the bands of similar homes on your street — homes of the same size and type should usually be in the same band, and if yours is higher than its neighbours, that is evidence worth gathering. The Valuation Office looks at the size, layout, character and location of the property, and at what it would have been worth on 1 April 1991 in England or 1 April 2003 in Wales. Bands can change when a property is altered — for example, demolishing part of a property, splitting one home into self-contained flats, converting flats into a single home, or adding a self-contained annexe can all lead to a new band — and a home that has grown since it was first assessed may move to a higher band when it is next sold. A challenge can move a band in either direction, so gather your evidence before you apply, and beware of agents who charge a fee or promise a refund: challenging your band through the Valuation Office is free, and GOV.UK warns that a number of fraudulent council tax agents are operating.

A quick checklist. First, check your band on GOV.UK and read your bill so you know what band you are in and what your council charges. Second, work out who counts as an adult in your household and whether anyone is disregarded — if only one countable adult lives there, claim the 25% discount. Third, check the student, disability and severe mental impairment discounts, and Council Tax Reduction if your income is low, because these are the reductions people most often miss. Fourth, if your home is empty or is a second home, ask the council about premiums and exceptions before the bill arrives. And finally, remember that council tax rates are set for each financial year, which runs from April, so check the official GOV.UK pages and your council's website for the current figures. This guide is general information, not personal advice, and if your situation is unusual — for example a house in multiple occupation, an annexe, or a home-based business — your council and the Valuation Office Agency can confirm how the rules apply to you.