Part of: UK Council Tax 2026 — Complete Guide → Council Tax Calculator UK 2026 — Estimate Your Annual Bill
TL;DR: Most English councils increased Council Tax by 4.99% for 2026-27 - the maximum permitted under MHCLG's combined core and adult social care referendum thresholds. Several Section 114 councils received above-cap dispensations (Birmingham 9.99%). Scotland granted councils up to ~8% flexibility. Wales saw 4-6% typical increases. The typical Band D English household pays approximately £100 more in 2026-27 than in 2025-26.
Last reviewed: 27 April 2026
The 2026-27 Referendum Threshold in England
The government sets maximum Council Tax increase thresholds above which a local referendum is legally required. For 2026-27, the thresholds for England were:
Upper-tier authorities (county councils, unitary authorities, metropolitan districts):
- Core Council Tax: up to 3% without a referendum
- Adult Social Care precept: up to an additional 2%
- Combined maximum: 4.99% without a referendum
Lower-tier district councils:
- Core Council Tax: up to 2.99% without a referendum
- No adult social care precept authority
Police and Crime Commissioners:
- Typically permitted to increase by £10 per Band D without a referendum (amounting to approximately 3-4% depending on starting level)
Most councils set their increase exactly at the referendum threshold limit - 4.99% for upper-tier, 2.99% for districts. Very few hold below the cap, and no council can exceed it without a referendum or government dispensation.
Section 114 Dispensations: Above-Cap Increases
Several councils in financial recovery following Section 114 notices were granted government dispensation to exceed the standard threshold:
Birmingham City Council (9.99%): England's largest local authority, following its 2023 Section 114, was permitted to increase by 9.99% in 2025-26 and continued above-cap increases as part of its multi-year financial recovery. The aim is to rebuild a structural budget gap created by equal pay liabilities, poor investment decisions, and adult social care cost growth.
Nottingham City Council: Also in multi-year recovery following its own Section 114, with above-cap increases permitted under the recovery plan.
Croydon, Thurrock, Slough: Councils that declared Section 114 in earlier years and are still working through above-cap increase programmes as part of their government-approved recovery trajectories.
The IFG (Institute for Government) has analysed the pattern of Section 114 councils, finding that they share common features: large equal pay liabilities, over-reliance on asset sales, and adult social care cost escalation that their funding settlements could not absorb.
The 2026-27 Scottish Settlement
Scotland's Council Tax settlement for 2026-27 came after several years of the multi-year freeze era ending (from 2023-24) and councils working to restore financial headroom:
The Scottish Government's 2026-27 Local Government Finance Settlement granted Scottish councils up to approximately 8% Council Tax increase flexibility, recognising:
- The cumulative impact of the freeze on council finances
- Adult social care cost pressures (also severe in Scotland)
- Staff cost increases following the 2025 National Insurance employers' contributions increase
- Infrastructure investment backlogs
City of Edinburgh exercised the maximum approximately 8% increase. Other Scottish councils chose between 0% (some smaller councils chose not to increase) and approximately 8% depending on their financial position.
COSLA (Convention of Scottish Local Authorities) negotiated with the Scottish Government on the settlement terms and has published analysis of the funding adequacy context.
Wales 2026-27
Welsh councils set their own Council Tax independently of the Welsh Government's referendum threshold system. In practice, Welsh councils increased by approximately 4% to 6% in 2026-27, with variation based on each council's specific financial pressures.
Some rural Welsh councils with significant second-home premium income (Gwynedd, Ceredigion) have additional revenue from second-home premiums of up to 300% above the standard rate. This additional income from second-home owners has provided some relief from the pressure to raise standard Council Tax, though the amounts are relatively small relative to total budgets.
Why Councils Are Raising at the Maximum Rate
Adult social care cost growth: Adult social care demand and unit costs have grown at approximately 8-10% per year for the past several years. The adult social care precept (the additional 2% that upper-tier councils can raise separately) is specifically designed to help fund this growth, but the 2% cap does not keep pace with actual cost increases.
National Insurance increase (April 2025): The increase in employers' National Insurance contributions from 13.8% to 15% (plus reduction in the secondary threshold) significantly increased councils' employment costs. With approximately 40-60% of local authority budgets spent on staff, even a 1.2 percentage point NI increase represents millions of pounds in additional annual costs for larger authorities.
Falling real-terms central government grant: The IFS has documented that per-resident local authority spending power (combining Council Tax and government grant) has not recovered to its 2009-10 peak even in nominal terms in many areas, let alone in real (inflation-adjusted) terms.
Homelessness and temporary accommodation costs: In London and other high-cost areas, the cost of providing temporary accommodation for homeless households has increased dramatically, driven by a shortage of social housing and high private rental costs.
SEND (Special Educational Needs and Disabilities) cost pressures: The high-needs block of local authority education funding has faced massive cost growth from increasing EHCP (Education, Health and Care Plan) demand. Many councils are facing Dedicated Schools Grant deficits.
The Typical Household Impact
For the average English household in a Band D property:
- 2025-26 England average Band D: approximately £2,171
- 2026-27 England average Band D: approximately £2,280
- Increase: approximately £109/year or approximately £9/month
This is a significant real-terms increase for most households, particularly for lower-income households who may not be eligible for CTR or who receive only partial CTR. However, for Council Tax Reduction recipients, the CTR applicable amounts are typically uprated in line with inflation, protecting low-income households from the nominal cost increase.
Protection for CTR Recipients
Pension-age Council Tax Reduction is passported from Pension Credit. When Council Tax rises, those on Pension Credit who receive 100% CTR effectively pay nothing regardless of the rise. The CTR award increases in line with the Council Tax bill.
For working-age CTR claimants, the position depends on the local scheme. Most schemes set their applicable amounts with reference to DWP benefit uprating, which typically keeps pace with inflation. A working-age claimant at maximum CTR (100%) continues to pay nothing even after the rise.
The Adult Social Care Funding Debate
Adult social care cost growth is the single biggest driver of Council Tax increases. Understanding why is essential to understanding why increases persist:
Demographic pressure: England's population is ageing. The number of people aged 85 and over is projected to roughly double by 2045. Older age brings higher rates of care need. More people needing more intensive care means higher spending even if the unit cost per person stayed flat.
Unit cost growth: The cost of providing each hour of care has risen significantly - driven by National Living Wage increases (which have raised care worker pay but also costs), employer National Insurance increases from April 2025, insurance, training, and overhead costs.
Assessment-led demand growth: The Care Act 2014 introduced clearer legal entitlements to needs assessments and care. Councils that previously managed demand through informal rationing have faced increasing legal challenges if they do not meet their statutory duties. This has driven up the number of assessed needs and the resulting care packages.
The funding gap: The adult social care precept (the additional 2% upper-tier councils can raise) was introduced specifically to generate more Council Tax income for social care. But at 2% of an average Band D of £2,280, the precept raises approximately £46/year per Band D equivalent property. On a council with 100,000 Band D equivalents, this generates approximately £4.6 million - a fraction of the adult social care budget pressures that might run to tens or hundreds of millions.
The IFS has repeatedly concluded that adult social care is structurally underfunded at the national level and that Council Tax alone cannot close the gap, even with maximum permitted increases.
How Scottish and Welsh Councils Compare on the Increase Picture
Scottish context: Scotland's councils are catching up after the multi-year freeze. The 2026-27 settlement allowing up to approximately 8% represents a significant step up, but Scottish councils have accumulated significant deferred investment and financial pressures during the freeze period. Even with 8% increases, some councils are still financially stressed.
Welsh context: Welsh councils increased by 4-6% in 2026-27, broadly in line with the English pattern. Welsh councils have similar adult social care pressures but operate under Welsh Government regulation and funding rather than MHCLG's English system.
Frequently Asked Questions
My council increased by more than 4.99% - how is that possible?
Either your council received a government dispensation (Section 114 recovery) to exceed the threshold, or you are in Scotland or Wales where different thresholds apply, or there has been a billing error. Check your council's published 2026-27 budget paper to confirm the declared increase percentage.
Why do councils always increase by exactly 4.99% rather than less?
The referendum threshold acts as a ceiling but also as a psychological anchor. Councils that set their increase below 4.99% effectively leave money on the table - they still face the same service cost pressures but with less income. Financial officers advise members to use the full permitted increase given the scale of unmet need. Additionally, a council that sets 3% this year and 4.99% next year provides less predictability than one that consistently sets 4.99%.
Will Council Tax keep increasing at this rate for years to come?
The long-run trajectory of Council Tax has been upward in real terms since its introduction in 1993, with only brief periods of freeze or modest increase (such as the government-imposed freezes of 2011-2016 and Scotland's extended freeze). The structural drivers (adult social care cost growth, falling relative government grant in real terms, population ageing, increasing SEND costs) all persist in 2026 and are not resolved by any policy announced as of the 2026-27 budget round. The IFS has consistently projected that continued above-inflation Council Tax increases are likely unless the funding settlement for local government is substantially restructured through a comprehensive spending review.
I received my bill and it seemed higher than expected - how do I check the increase?
Compare your 2026-27 demand notice with your 2025-26 demand notice (keep previous demand notices for this purpose). Calculate the percentage increase: divide the difference between the two annual charges by the 2025-26 charge and multiply by 100. If the increase exceeds the announced threshold for your council area (typically 4.99% for upper-tier, 2.99% for districts), contact the revenues team to verify and ask for the breakdown of each precepting authority's increase.
Does the Council Tax increase affect how much Council Tax Reduction I receive?
If you receive Council Tax Reduction at a fixed percentage of the bill (for example, 70% of the charge), the CTR amount increases in absolute cash terms as the bill increases - you continue to pay 30% of a higher number. If you receive 100% CTR, you pay nothing regardless of the annual increase. If you receive partial CTR and your income has not changed since the last assessment, the cash amount of CTR typically increases proportionally with the bill because the applicable amounts in CTR schemes are usually uprated annually to reflect inflation and benefit uprating. In practice, for most CTR claimants, the net effect of the Council Tax increase on their own payment is minimal because the CTR absorbs most of the increase.
How we verified this
The 2026-27 referendum threshold framework is from MHCLG's published referendum principles for Council Tax increases. Section 114 dispensations are from MHCLG press releases and individual council financial statements. The Scottish Government's 2026-27 settlement is from the Scottish Government's published local government finance settlement documents. COSLA provides Scottish council perspective. IFG analysis on Section 114 patterns and council financial distress is from published IFG research. IFS analysis on real-terms spending power is from IFS local government finance publications. IRRV provides professional guidance on Council Tax setting.
Sources & Verification
- MHCLG Council Tax referendum principles 2026-27: https://www.gov.uk/government/collections/council-tax-statistics
- Local Government Finance Act 1992 (referendum thresholds): https://www.legislation.gov.uk/ukpga/1992/14/contents
- Scottish Government Local Government Finance: https://www.gov.scot/policies/local-government/local-government-finance/
- COSLA analysis: https://www.cosla.gov.uk/
- IFG (Institute for Government) local government finance: https://www.instituteforgovernment.org.uk/
- IFS (Institute for Fiscal Studies) local government research: https://ifs.org.uk/
- IRRV (Institute of Revenues, Rating and Valuation): https://www.irrv.net/
This article is for informational purposes only and does not constitute legal, financial, or tax advice. Council Tax rules vary by local authority and change annually. Always verify current rates and rules with your local council and gov.uk before making any decision.
