Your refuse collection, road maintenance, policing, schools, public libraries and many other local services and amenities are funded in part by your Council Tax contributions.

The levy was introduced in 1993 to replace the unsuccessful Community Charge, commonly known as the Poll Tax, and is based on the value of your home.

Any occupied properties that can be regarded as a dwelling are liable for Council Tax, including mobile homes and houseboats if they are the residents’ main dwelling.

Cost

Every household falls into one of eight bands, running from A to H, which were set in 1991, based on current property prices.

A: up to £40,000
B: £40,001 to £52,000
C: £52,001 to £68,000
D: £68,001 to £88,000
E: £88,001 to £120,000
F: £120,001 to £160,000
G: £160,001 to £320,000
H: more than £320,000

The higher the band, the higher the tax bill. Though the amount paid by householders in each bracket varies from area to area – often greatly – as each local authority in the UK sets its own rates.

Rates typically increase every year. In fact, since it was introduced, the amount of Council Tax being paid in England, Wales and Scotland has more than doubled.

However, central government has the power to set a limit on a local authorities Council Tax rates. This is called ‘capping’ and is hugely unpopular with councils.

Exemptions

You are entitled to a 25% discount if you live alone or are your household’s only adult resident.

This reduction also applies to households made up of a student living with one other non-student, but households with a student and more than one non-student must pay the full amount of Council Tax.

You are also eligible to a discount if your household includes a full-time carer or someone with a severe mental illness.

Pensioners can claim a discount if they live alone, or are on a low income or are disabled. The 2005 Budget offered households with a pensioner aged 65 to 80 a lump sum of £200 to help with Council Tax bills. The amount increases to £250 for the over-80s.

Means-tested Council Tax benefit for pensioners can be sought from your local authority and can be as much as 100% - though the exact amount depends on your age, health, savings and your house’s tax ratings band.

Your second home (if you’re lucky enough to have one) is eligible for a discount, which traditionally has been 50%. However, in recent years several councils have reduced this figure, some to as little as 10%.

To be exempt from paying Council Tax your household must be occupied entirely by either students, people aged under 18, residents with severe mental disabilities or diplomats, or be armed forces accommodation.

If your home has moved into a higher ratings band because of building work you have added for the use of a disabled resident, such as a new bathroom or bedroom, you might be entitled to a Council Tax rebate.

The future

In 2005 the government will begin the Council Tax’s first revaluation in time for 2007, with proposals including increasing the difference between the highest and lowest ratings bands, or scrapping the current method of taxation and replacing it with one based on people’s income.

Critics of the proposed reforms claim that seven million families face a hike of 20% or more in their Council Tax bills; an average of around £270 per household.

There are fears that those most badly affected by the revaluation will be middle class residents of London and England’s south-east whose properties have increased significantly in value since 1991.