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61-692: As the RPI was held not to meet international statistical standards, since 2013, the Office for National Statistics no longer classifies it as a "national statistic", emphasising the Consumer Price Index instead. However, as of 2018, the UK Treasury still uses the RPI measure of inflation for various index-linked tax rises. RPI was first introduced in 1956, replacing the previous Interim Index of Retail Prices that had been in use since June 1947. It

122-473: A "national statistic". However, ONS will continue to calculate RPI, among several versions of the inflation index, in order to provide a consistent historic inflation time series. The index factors continue to be used to adjust for inflation in the calculation of chargeable (capital) gains for inclusion in the tax computation for entities subject to corporation tax in the UK. In January 2018, Mark Carney , Governor of

183-494: A few streets or as large as an entire county. These all set their precepts independently. Each of the levying authorities sets a precept (total amount) to be collected for households in their area. This is then divided by the number of nominal Band D properties in the authority's area (county, district, national park, etc.) to reach the Band D amount. In general terms: The occupiers of a property are liable, regardless of tenure, or

244-431: A full share; to assist individuals sharing with those residents, a rebate ( Second Adult Rebate ) was available, as follows: Council Tax Benefit was a means-tested rebate that potentially rebated 100% of a claimant's Council Tax bill. The rebate would be reduced by a fifth of any qualifying income above a certain level; benefits did not qualify for this calculation, but most other income did. In effect, Council Tax Benefit

305-652: A low of £1,024 (in the Western Isles) to a high of £1,230 (in Aberdeen), but the effect can be more pronounced in parts of England. For example, the 2018 rates in London had this sort of distribution: Under the Labour government of Tony Blair , average Council Tax rates rose dramatically above inflation. The subsequent Coalition government made an effort to get councils to freeze Council Tax rates, gradually eroding

366-517: A multimillion-pound mansion will pay three times more than someone in a bedsit, which falls into Band A. The government had planned to revalue all properties in England in 2007, which would have been the first revaluation since 1993, but in September 2005, it was announced that the revaluation in England would be postponed until "after the next election". At the same time, the terms of reference of

427-588: A nominal 1991 (2003 for Wales) value. Each local authority sets a tax rate expressed as the annual levy on a Band D property inhabited by two liable adults. This decision automatically sets the amounts levied on all types of households and dwellings. The nominal Band D property total is calculated by adding together the number of properties in each band and multiplying by the band ratio. So 100 Band D properties will count as 100 nominal Band D properties, whereas 100 Band C properties will count as 89 nominal Band D properties. Each collecting authority then adds together

488-424: A rebate. Since 2013, explicit Council Tax discounts have been provided, now officially known as Council Tax Reduction schemes, though many councils market them to residents as Council Tax Support ; the choice to market the rules as a tax cut, rather than a benefit, may be an ideological one. . Many local authorities choose to use similar or identical rules to the former statutory rebate schemes, while others took

549-605: A resident of a property, an individual should have the property as their sole or main residence; case law has established that no single test may be used to determine whether this condition is met. As part of the National Fraud Initiative, every other year, the Audit Commission analyses metadata deriving from Council Tax accounts together with the full electoral register to produce lists of people it believes should be subjected to an investigation on

610-575: A thorough review, in 2012 the National Statistician's Consumer Prices Advisory Committee (CPAC) determined that due to the use of the Carli formula in certain subcomponents, the RPI is biased upwards compared to other indices by a "formula effect" of roughly one percentage point. CPAC concluded that "the use of the Carli formula is no longer appropriate" due to the weak axiomatic properties of

671-567: Is a local taxation system used in England, Scotland and Wales. It is a tax on domestic property , which was introduced in 1993 by the Local Government Finance Act 1992 , replacing the short-lived Community Charge (also known as "poll tax"), which in turn replaced the domestic rates . Each property is assigned one of eight bands in England and Scotland (A to H), or nine bands in Wales (A to I), based on property value, and

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732-444: Is a progressive tax based on the value of the property; the higher the value of the property, the higher the amount of tax levied irrespective of the number of inhabitants at the property (except the reduction allowed for single tenancy). However, there is only one band for properties valued (in 1991 or, for those built later, the value they would have had then) above £320,000, and so the tax stops increasing after this point. Therefore,

793-634: Is a devolved matter, the Barnett Formula leads the Scottish Government to acquire funding somewhat in accordance with central government priorities. Subsequently, by 2013, the Scottish Government froze Council Tax rates for the fourth time. Some dwellings are automatically exempt from Council Tax liability; these are officially organised into a number of distinct classes. Most of these exemption classes only apply when

854-587: Is disregarded if they are: A fixed discount, currently set at 25%, is available when there are fewer than two residents; this is known as the Single Person Discount . Though it is often concluded that the full Council Tax charge must, therefore, be based on two or more adults being resident at a property, this is not strictly true. Some people are automatically disregarded when counting the number of residents for this purpose, such as full-time students. The legislation also provides that, to count as

915-444: Is facing growing attention is the number of households that are falling into arrears with their Council Tax payments. The ordinary route for councils to chase unpaid debts is to apply to a magistrates' court for a liability order. If a liability order is granted, the council can undertake enforcement action. In 2014–15, the court and administration costs in relation to Council Tax debt increased by 17%. The collecting authorities are

976-454: Is no longer used by the government for the inflation target for the Bank of England 's Monetary Policy Committee nor, from April 2011, as the basis for the indexation of pensions of former public sector employees. As of 2016, the UK state pension is indexed by the highest of the increase in average earnings, CPI or 2.5% ("the triple lock"). The highest annual inflation since the introduction of

1037-667: Is the most comprehensive measure of inflation. It extends the Consumer Prices Index (CPI) to include a measure of the costs associated with owning, maintaining and living in one's own home, known as owner occupiers'. CPI is usually lower, though this is due more to the differences in the calculation formulas for the indices than to the differences in coverage. The UK Government announced in the June 2010 budget that CPI would be used in place of RPI for uprating of some benefits with effect from April 2011. Regarding state pensions,

1098-539: The Conservative MP, has said that CPI targeting meant that interest rates were set lower at a time of rising (RPI) inflation. Nevertheless, following the UK general election of May 2010 the incoming Conservative Chancellor George Osborne announced that CPI was to be more widely adopted, including for setting benefits and pensions . In January 2013 the Office for National Statistics announced its conclusion that

1159-619: The Exchange Rate Mechanism . Initially, the target was based on the RPIX , which is the RPI calculated excluding mortgage interest payments. This was felt to be a better measure of the effectiveness of macroeconomic policy. It was argued that if interest rates are used to curb inflation, then including mortgage payments in the inflation measure would be misleading. The Treasury set interest rates until 1997. On election day in May 1997,

1220-675: The Harmonised Index of Consumer Prices ( HICP ). The traditional measure of inflation in the UK for many years was the Retail Prices Index (RPI), which was first calculated in the early 20th century to evaluate the extent to which workers were affected by price changes during the First World War. The main index was described as the Interim Index of Retail Prices from 1947 to 1955. In January 1956, it

1281-608: The Treasury concluded that rents should follow RPI down as far as −2% per annum, leading to savings in housing benefit . In February 2011, annual RPI inflation jumped to 5.1% putting pressure on the Bank of England to raise interest rates despite disappointing projected GDP growth of only 1.6% in 2011. The September 2011 figure of 5.6%, the highest for 20 years, was described by the Daily Telegraph as "shockingly bad". After

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1342-490: The Band D amounts for their area (or subdivisions of their area in the case, for example, of civil parish council precepts) to reach a total Band D Council Tax bill. To calculate the Council Tax for a particular property, a ratio is then applied. A Band D property will pay the full amount, whereas a Band H property will pay twice that. Note there is no upper limit for band H. This means that in reality, someone who lives in

1403-568: The Bank of England, said that RPI should be abandoned. In November 2021, inflation has risen faster than projected to its highest level in nearly a decade, putting pressure on the Bank of England to increase interest rates. According to data from the ONS, the annual rate of the CPI increased to 4.2 percent in October, up from 3.1 percent in September. Inflation surpassed the Bank of England's target of 2% and

1464-475: The CPI also reverts to its previous level (which is not the case with the calculation method used for the RPI). The Government Actuary's Department estimates this difference in averaging method accounts for about 0.9% of the average 1.15% annual difference between CPI and RPI. The change in the CPI over the 12 months to August 2008 was 4.7%, while the corresponding figure for RPIX (which excludes mortgage interest)

1525-480: The Carli method. (The weak property is the fact that after a price bounce and a subsequent full return to original prices, the Carli method shows positive aggregate inflation.). In 2013, following a consultation on options for improving the RPI, the National Statistician concluded that the formula used to produce the RPI does not meet international standards and recommended that a new index known as RPIJ be published. Subsequently ONS decided to no longer classify RPI as

1586-424: The Council Tax bill, Council Tax Benefit was reduced so that it only covered the claimant's hypothetical portion of the Council Tax bill. However, no reduction was imposed if the claimant or their partner needed substantial care; this qualification was met if, and only if, the claimant was: No contribution was expected from non-dependants who would themselves qualify for Council Tax benefit, were not counted towards

1647-535: The Lyons Inquiry were extended and the report date pushed out to December 2006 (subsequently extended to 2007). In Wales, tax bills based on the property revaluations use 2003 prices issued in 2005. Because of the surge in house prices over the late 1990s and early 2000s, more than a third of properties in Wales found themselves in a band higher than under the 1991 valuation. Some properties were moved up three or even four bands with consequent large increases in

1708-562: The RPI came in June 1975, with an increase in retail prices of 26.9% from a year earlier. By 1978, this had fallen to less than 10%, but it rose again towards 20% over the following two years before falling again. By 1982, it had fallen below 10% and a year later was down to 4%, remaining low for several years until approaching double figures again by 1990. Aided by a recession in the early 1990s, increased interest rates brought inflation down again to an even lower level. From March to October 2009,

1769-406: The RPI did not meet international standards and it is no longer formally ranked as a UK 'National Statistic'. The basket of goods and services chosen is intended to reflect changes in society's buying habits. For example, on 23 March 2009, rosé wine and takeaway chicken were added to the basket, whereas volume bottled cider and boxes of wine were removed. Council tax Council Tax

1830-412: The RPI, the CPI takes the geometric mean of prices to aggregate items at the lowest levels, instead of the arithmetic mean . This means that the CPI will generally be lower than the RPI. The rationale is that this accounts for the fact that consumers will buy less of something if its price goes up, and more if its price goes down; it also ensures that if prices go up and then revert to the previous level,

1891-623: The RPIY, which excludes indirect taxes ( VAT ) and local authority taxes as well as mortgage interest payments, and the RPIJ which uses the Jevons (geometric) rather than the Carli (arithmetic) method of averaging. Consumer Price Index (United Kingdom) The Consumer Price Index ( CPI ) is the official measure of inflation in consumer prices in the United Kingdom. It is also called

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1952-428: The UK government confirmed in their autumn statement in 2011 that these would go up by the greater of the CPI, average earnings, or 2.5%. The variability of the change in RPI, due to fluctuations in mortgage interest rates, is shown in the graph on the right. This was one of the arguments used in favour of changing to RPIX. Variations on the RPI include the RPIX , which removes the cost of mortgage interest payments,

2013-401: The above inflation increases via ordinary inflation. This was achieved by offering councils large grants in return for freezing their Council Tax rate; for example, in some years these grants were equal to the amount that would have been gained by a 1% Council Tax rise. In addition, the law has been changed, so that councils cannot increase Council Tax by an amount higher than a cap specified by

2074-453: The amount of Council Tax demanded. Some properties were moved into new Band I at the top of the price range. Only 8% of properties were moved down in bands. However, a large shift of properties between bands will cause a shift in the allocation of the charge between bands, and the tax levied for each particular band will then drop, as the total amount collected will remain the same for each authority (see "calculation of amount" above). Between

2135-455: The bands were re-set on 1 April 2005 by the then National Assembly for Wales , based on 2003 valuations. In addition to revising the band boundaries upwards, an extra band was added. In Scotland , the current bands are Due to the different make-up of each council area, Council Tax rates can vary quite a bit between different local authorities. This is less noticeable in parts of the country like Scotland, where band D rates in 2011 varied from

2196-407: The basis that there is a risk that a discount is being received when an adult who does not fail to be disregarded is actually resident in the dwelling. If a property has been adapted to meet the needs of a disabled occupant, then, after applying in writing, and provided the adaptations are of a certain extent, the property will be rebanded to the band immediately below its normal Council Tax band. If

2257-430: The bill being delivered to the claimant, effectively creating a discount. However, the schemes were administered by the local authority responsible for producing the relevant Council Tax bill. Though the funding was provided by central government, the Council Tax bill it rebated was paid to the local authority. Originally using paper application forms, local authorities began to use a telephone-based application process, in

2318-424: The calculation of RPIJ and CPI. The unweighted Carli method overstates inflation rates. However as stated above, the RPI calculation employs weights, which remove this overstatement. In practice the comparison is made over shorter periods, and the weights are frequently reassessed. Detailed information is published on the Office for National Statistics website. The RPI includes an element of housing costs, whereas

2379-457: The change in RPI measured over a 12-month period was negative, indicating an overall annual reduction in prices, for the first time since 1960. The change in RPI in the 12 months ending in April 2009, at −1.2%, was the lowest since the index started in 1948. Housing associations lobbied the government to allow them to freeze rents at current levels rather than reduce them in line with the RPI, but

2440-507: The councils of the districts of England , principal areas of Wales and council areas of Scotland , i.e. the lowest tier of local government aside from parishes and communities. The precepting authorities are councils from other levels of local government such as county or parish councils and other agencies. In metropolitan counties where there is no county council, the joint boards are precepting authorities. There may be precepting authorities for special purposes that cover an area as small as

2501-417: The exact nature of Council Tax and states that: The tax is a mix of a property tax and a personal tax. Generally, where two or more persons reside in a dwelling the full tax is payable. If one person resides in the dwelling then 75% is payable. An empty dwelling attracts only a 50% charge unless the billing authority has made a determination otherwise. At the bottom and middle end of the market, Council Tax

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2562-559: The following items are not included in the CPI: Council tax , mortgage interest payments, house depreciation, buildings insurance, ground rent, solar PV feed in tariffs and other house purchase cost such as estate agents' and conveyancing fees. A further index, CPIH, has been published which includes housing costs but CPIH does not meet current international standards. The Office for National Statistics states that: The Consumer Prices Index including owner occupiers' housing costs (CPIH)

2623-552: The government (currently 3%), without holding a local referendum to approve the change; so far only one council has invoked such a referendum, but many have raised Council Tax as close to the cap as they can get without passing it (for example, by 2.99%). This limit, combined with falling grants from central government due to austerity policy, has led councils to have a real-terms cut in spending power of more than 10% in 2021–22 compared to 2009–10, which has inevitably led to service reductions and cuts. Although local government policy

2684-409: The highest collection rates of any tax, with in-year collection rates of 97.0% in 2014–15. Council Tax is collected by the local authority (known as the collecting authority ). However, it may consist of components (precepts) levied and redistributed to other agencies or authorities (each known as a precepting authority ). The Valuation Tribunal Service has cleared up many previous doubts regarding

2745-511: The last few years of the rebate schemes. Under these latter application schemes, claimants would often contact the responsible central government department (for example, by making a benefit claim ), who would then forward the details to the local authority. Many individuals share their dwelling with members of separate households, who would ordinarily be expected to pay a share of the Council Tax bill. However, in some cases, it would not be reasonable to expect those other residents to be able to pay

2806-532: The new Labour government handed control over interest rates to the politically independent Bank of England Monetary Policy Committee . This committee is given the responsibility of adjusting interest rates in order to meet an inflation target set by the Chancellor. The initial target rate of inflation was an RPIX of 2.5%. The committee meets once per month to decide whether any changes to the interest rate are necessary. If, in any month, inflation deviates from

2867-476: The opportunity to levy a small level of tax on people with low incomes. In particular people in receipt of the Guarantee Credit element of Pension Credit (or who would meet the same qualifying rules) must continue to receive a 100% discount (that is, a Council Tax bill of £0). Historically, a number of statutory Council Tax rebates existed. These were applied to the Council Tax account in advance of

2928-470: The owners if the property is unoccupied, except if the property is a house in multiple occupation , in which case the landlord is liable for paying the Council Tax. Each dwelling is allocated to one of eight bands coded by letters A to H (A to I in Wales) on the basis of its assumed capital value (as at 1 April 1991 in England and Scotland, 1 April 2003 in Wales). Newly constructed properties are also assigned

2989-462: The previous target of RPIX of 2.5%. The Consumer Prices Index, including owner-occupiers' housing costs (CPIH), became the lead inflation index in UK official inflation statistics on 21 March 2017. The CPI calculates the average price increase as a percentage for a basket of 700 different goods and services. Around the middle of each month it collects information on prices of these commodities from 120,000 different retailing outlets. Note that unlike

3050-428: The property is completely unoccupied; these are as follows: The remaining exemption classes apply not only when the property is unoccupied, but also when certain categories of people are living there: Other classes existed historically and are no longer mandatory. Councils may still offer 100% discount; some discount or no discount at all at their discretion. Once a property has been vacant for over 2 years, they have

3111-559: The property was in the lowest Council Tax band, it will be placed into a Band Z (the band below A). Under the Welfare Reform Act 2012 , local councils were given powers to create new deduction rules for their Council Tax. As these rules replace the former statutory rebate schemes, the Act has also restricted the councils from increasing, by more than a certain amount, the net Council Tax bill for any individual who previously received

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3172-484: The right to levy a surcharge of up to an additional 50% on the standard Council Tax rate for the property. All persons normally resident in a property are counted for Council Tax liability. However, certain classes of person are treated as 'disregarded persons'. Such persons do not count towards occupancy. If a property is occupied entirely by disregarded persons then it is taxed as an empty property (50% discount) unless it otherwise qualifies for total exemption. A person

3233-513: The target by more than one percentage point, the Governor of the Bank of England is required to write an open letter to the Chancellor explaining the reasons for this and proposing a plan of action for bringing inflation back towards the target. Since 1996, the United Kingdom has also tracked a Consumer Price Index figure, and in December 2003, the inflation target was changed to CPI of 2% from

3294-533: The tax has been criticised for being disproportionate, with those in more expensive houses not paying as much as those in smaller houses as a proportion of the value of the house, and has therefore been called a "new poll tax for the poor". The valuation of the property is carried out by the Valuation Office Agency in England and Wales and by Scottish Assessors in Scotland. An area that

3355-452: The tax is set as a fixed amount for each band. The higher the band, the higher the tax. Some property is exempt from the tax, and some people are exempt from the tax, while some get a discount. In 2011, the average annual levy on a property in England was £1,196 (equivalent to £1,841 in 2023). In 2014–15, the tax raised enough money to cover 24.3% of council expenditure. Council Tax is difficult to avoid or evade and therefore has one of

3416-442: The wholesale revaluations, a major change to a property (such as an extension, or some major blight causing loss of value) can trigger a revaluation to a new estimate of the value the property would have reached if sold in 1991. If such a change would result in an increase in value, then re-banding will only take effect when the property is sold or otherwise transferred. In England , the Council Tax bands are as follows: In Wales ,

3477-650: Was 5.2% and that for RPI (which includes mortgage interest) was 4.8%. The CPI, the RPIX, and the RPI are published monthly by the Office for National Statistics (ONS). A history of CPI and RPIX going back to 1989 can be found at the ONS' website. There has been criticism of CPI as being a less effective measure of price rises than the Retail Prices Index, accusing it of being easier to manipulate and less broad based (for example excluding housing). John Redwood ,

3538-494: Was a rebate for people with low incomes. The claimant could not be awarded both Council Tax Benefit and Second Adult Rebate; only the higher of the two, in relation to the claimant's circumstances, would be awarded. A non-dependant is a person that the claimant is sharing accommodation with but is not a member of their own household (that is, not a partner, dependant, etc.), such as lodgers or joint tenants. Since it would be reasonable to expect non-dependants to contribute towards

3599-403: Was higher than the 3.9 percent predicted by experts. Higher rates for transportation, restaurants, and hotels mainly contributed to the price increase in October. The United Kingdom RPI is constructed as follows: This enables the percentage change to be calculated over the desired time period. The RPI calculation employs a variation of the Carli method rather than the Jevons method employed in

3660-408: Was once the principal official measure of inflation. It has been superseded in that regard by the Consumer Price Index (CPI). The RPI is still used by the government as a base for various purposes, such as the amounts payable on index-linked securities, including index-linked gilts , and social housing rent increases. Many employers also use it as a starting point in wage negotiation. Since 2003, it

3721-656: Was rebased and renamed the Index of Retail Prices. In January 1962, this was replaced by the General Index of Retail Prices, which was again rebased at that time. A further rebasing occurred in January 1987, subsequent to the issue of the first index-linked gilts. An explicit inflation target was first set in October 1992 by Chancellor of the Exchequer Norman Lamont , following the UK's departure from

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