Council Tax is a local tax that contributes more than £2 billion towards the funding of local public services annually.
Each individual council sets the rate that applies in their local authority area, administers and collects the tax, and determines how the receipts are used to fund local services. We and the Scottish Parliament are responsible for the legislation that defines Council Tax.
Although each council is responsible for setting their Council Tax rate, we have agreed with local government for increases to be capped at 3% in the financial years 2017 to 2018 and 2018 to 2019.
This 3% cap helps to protect household incomes while ensuring local authorities continue to be properly funded.
On this page you can read about:
- how Council Tax works
- Council Tax reduction scheme
- care leavers exemption
- second homes and unoccupied properties
- Council Tax reforms
How council tax works
Introduced in 1993 by the Local Government Finance Act 1992, Council Tax is a system of property taxation that is levied locally on each domestic property in Scotland.
The amount charged on each property is calculated based on its assigned valuation band, from A (lowest) to H (highest), based on its relative property value.
Councils set the Band D rate for their local authority area, with the charges for properties in other bands being a fixed proportion of that Band D charge. Those proportions apply nationally and are set out in law.
Our Council Tax reforms, in operation from April 2017, make council tax fairer by changing how the rate for more expensive properties in bands E to H is calculated.
Some types of property are exempt from Council Tax, while discounts and the means-tested Council Tax reduction scheme may reduce the amount payable.
Council Tax is not a charge for services used by any individual. The money raised contributes directly to the delivery of local public services provided by each local authority, and is spent in the district in which it is raised.
Each local authority is responsible for the administration and implementation of Council Tax, as well as how receipts are spent within its local authority area. This includes the determination and calculation of liability, billing, collection and enforcement of amounts payable.
Local authorities are also responsible for implementing all Council Tax discounts and exemptions, and applying means-tested reductions through the Council Tax reduction scheme.
Each of the 14 local Scottish Assessors is responsible for valuing properties for Council Tax purposes in the local authority district(s) they serve. They assign each property in Scotland one of eight valuation bands, from A (lowest) to H (highest), based on its relative property value.
Valuation Appeal Committees
Where a liable party disputes the valuation band allocated to a property, the relevant local Valuation Appeal Committee can hear appeals and make a final determination regarding council tax banding, subject to appeal to the Court of Session on a point of law. The committees can also hear appeals regarding the determination and calculation of Council Tax liability.
Council Tax Reduction Review Panel
The Council Tax Reduction Review Panel can independently review and hear appeals against local authority decisions relating to relief provided by the means-tested council tax reduction scheme.
Council Tax reduction scheme
Our means-tested Council Tax Reduction (CTR) scheme reduces or eliminates the council tax liability of around 500,000 lower income households in Scotland, depending on household circumstances and ability to pay.
By the end of financial year 2018 to 2019, we will have invested more than £1.4 billion in CTR. In 2017, we extended the CTR scheme to deliver greater relief to households with children, and to provide relief for low to middle income households from the impact of the council tax reforms on properties in bands E - H.
Responsibility for implementing the CTR scheme rests with local authorities. Anyone who thinks they might be eligible for a reduction under the CTR scheme should contact their local authority.
Care leavers exemption
Many young people leaving care require support to manage the effects of their pre-care and in-care experiences as they make the transition into adulthood and independent living. We have implemented a mandatory exemption to Council Tax for all care leavers under the age of 26 who were looked after by a local authority on or after their 16th birthday.
A property is exempted from council tax where all adult residents of the household are care leavers, students, school leavers or those affected by a severe mental impairment. Care leavers are also disregarded from the calculation of the number of adult residents of a household for Council Tax discount purposes. Anyone who thinks they may be eligible should contact their local authority.
Second homes and unoccupied properties
For Council Tax purposes, a second home is a property which is no-one's main residence but which is occupied for at least 25 days a year. Each council has discretion to apply a discount of between 10% and 50% on second homes, or may choose to apply no discount. Job-related dwellings or purpose-built holiday homes must have a 50% discount applied.
Councils have discretion to vary the council tax payable on unoccupied properties. Initially a discount of between 10% and 50% is required, but after a property is unoccupied for 12 months (or 24 months if being actively marketed for sale or let), an increase of up to 100% may be imposed to encourage owners to bring empty homes back into use.
Revenue generated by variation in council tax liability
Revenue generated from applying Council Tax discounts of between 50% and 10% on second homes and long-term unoccupied properties is reserved for spending that supports the provision of new affordable housing. Any additional revenue raised from further reduced discounts, or applying a levy, can be used as the local authority sees fit.
More information on local authorities' discretionary powers to vary the Council Tax on these properties can be found in the Council Tax on second and long-term unoccupied homes: guidance.
Council tax reforms
In April 2017 we introduced a package of reforms designed to make Council Tax fairer, by:
- changing the way tax on the 25% of properties in the four highest valuation bands is calculated
- establishing a relief system for low to middle-income households in properties affected by the changes
The reforms build on the findings in the report of the independent Commission on Local Tax Reform, in which the Commission said that to make a property tax fair, it would need to be more progressive and include extensive income-based relief based on households' ability to pay.
The reforms address the inherent unfairness of the original council tax system, which determined that lower-banded properties paid more as a proportion of property value than households in the higher valuation bands.
We are committed to making local taxation more progressive while improving the financial accountability of local government.