With Council Tax bills set to rise by more than £100 next year and a raft of other price hikes in the offing, we look at what this means for your money.
With the Government confirming a 4.99% cap on Council Tax increases, our bills are set to soar yet again in the next tax year.
However, this isn’t the only financial hit on the horizon as last month’s Budget brought an array of other tax hikes.
In fact, the Office for Budget Responsibility has forecast the chancellor’s announcements will cost the average Brit £300 per year.
Here, we take a closer look at the increases to Council Tax and explore four other hikes coming our way in 2025.
Council Tax – more than £100
Council Tax bills could rise by £109 for the average household in 2025, as the Government confirmed that it plans to retain the current cap on annual increases.
At present, Local Authorities can hike our bills by up to 4.99% every year, with higher increases requiring a referendum.
In effect, this means Brits will face increases around three times higher than the current rate of inflation of 1.7%.
If you live in the average Band D property, a 4.99% hike would cause your bill to increase by £109 next year, with typical costs for the 2024/25 tax year standing at £2,171.
Residents in the most expensive Band H properties, who currently pay £4,342, could see their bills increase by an average of £217.
According to Matthew Pennycook, communities minister, these rises could bring in an extra £1.8 billion for Local Authorities during the next tax year.
Opinion: 5 reasons the Council Tax system is broken
Councils going bust
Although councils are under no obligation to hike rates by the full 4.99%, most Local Authorities opt for the maximum increase each year.
And the trend is likely to continue in 2025/26, as increasing numbers of councils face financial hardship, with some on the brink of collapse.
According to data released by the Local Government Information Unit earlier this year, more than half of Local Authorities could effectively declare bankruptcy within the current parliament.
Almost 20 councils have also been given dispensation to sell their assets during 2024 in order to bring in extra cash.
Worryingly for residents, bankrupt Local Authorities have special dispensation to increase bills at an even higher rate.
For example, Croydon council was able to put bills up by 15% in 2023/24.
But what else is set to rise in 2025?
Road Tax – £2,745 (for some)
Rachel Reeves’ Budget brought bad news for drivers of certain high-polluting cars as she imposed a painful increase in road tax (technically known as VED) on these vehicles.
Under her plans, some motorists could see their annual bills double from £2,745 to £5,490.
Cars impacted by the move are those emitting more than 255g/km of CO2. Typically, these are high-performance models, including Audi and BMW.
For those paying the standard rate of VED, bills will rise in line with inflation.
You can read more about the Government’s plans for road tax in this article.
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Supermarket prices – already up 2.3%
Since the chancellor announced a 1.2% increase in National Insurance (NI) payments for employers, the bosses of several major supermarket chains have lashed out against the move.
Sainsbury’s chief Simon Roberts said his firm’s bill will soar by £140 million next year due to the chancellor’s “unexpected announcement”, while M&S has also said that its bill will increase by £60 million next year.
On top of this, the chancellor slashed the salary thresholds on which NI is payable from £9,100 to £5,000.
Inevitably, supermarkets will pass these costs onto customers, with food inflation already up 2.3%, according to the latest data from the British Retail Consortium.
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Mobile phone and broadband – BT “reviews” prices
Like the supermarket bosses, the chief executive of BT has also warned that prices could rise as a result of Labour’s economic policy.
According to chief executive Alison Kirkby, the Government’s plans will slap her company with a further £100 million tax bill.
As a result, BT now plans to go “harder and faster” with its cost-cutting measures in order to counter the impact of rising taxes, which would include a review of its prices.
Ofcom to ban mid-contract price hikes linked to inflation in boost to customers
Pensions – £2,000 less in retirement for some (£700 for others)
Rachel Reeves’ attack on NI for businesses could also see some workers lose up to £2,000 in retirement, new data suggests.
Although this isn’t technically a hike, it will, of course, hit hard.
With employers facing higher NI bills, they will look for ways to cut costs, with pay freezes being a likely option.
And, if wages were to remain frozen, pensions contributions would also be lower as these are based on earnings.
Let’s take the example of a worker earning £100,000. Admittedly, this is far higher than the typical wage.
According to research from consultancy firm Barnett Waddingham, a 0.5% cut in pay rises could lead to a loss of £2,000 in retirement.
For a worker on a more reasonable £35,000, this loss would be £700 and the figure would be £1,200 for someone earning £60,000.