Record numbers of cash-strapped local authorities could be forced to hike council tax over the 5 per cent increase limit next year, raising bills by hundreds of pounds, experts have warned.
Residents in affected areas would see band D bills soar beyond the £120 rise faced by the typical council taxpayers next year.
Some London councils are thought to be discussing mammoth increases of 100 to 160 per cent, which would add an extra £500 to £800 onto average annual bills.
Billpayers in Tory councils with traditionally low charges have been warned they are among the most likely to face large tax rises in April.
“I think the Government is likely to be more comfortable with council tax going up when it comes to Conservative-run councils,” a local Government source told The i Paper.
“Because they can say, ‘Well okay – you shouldn’t have kept it so low for so long’.”
Record number of councils in financial crisis
Councils need special permission from the Government to raise council tax over 5 per cent cap with a local referendum.
Seven local authorities were allowed to push beyond the limit in 2026-27, including Worcestershire County, Shropshire and North Somerset councils, which all hiked bills by 9 per cent.
Another six local authorities – Wandsworth, Westminster, Hammersmith and Fulham, City of London, Kensington and Chelsea, and Windsor and Maidenhead – have already been granted permission to go above the cap in 2027-28.
Kensington and Chelsea can hike council tax over 5% (Photo: Jason Alden/Getty Images)No decisions have been made yet, but more council bosses could join the group of six and ask to make tax hikes over the limit in the run up to April 2027.
A record number of local authorities are receiving “exceptional financial support” (EFS) agreed by the Government to help plug huge funding gaps.
A group of 36 councils have been allowed to collectively borrow £1.5bn in 2026-27 in a bid to avoid bankruptcy. They have agreed to clear repayment plans that include spending cuts.
The EFS list includes several crisis-hit London boroughs, including Croydon, which is receiving £119m in special loans support this year. Haringey is receiving £84m, Barnet is getting £80m, Havering £77m, Redbridge £70m, Hillingdon £62m and Lambeth £20m.
Worcestershire, Shropshire, Trafford, Warrington, Windsor and Maidenhead – which all raised council tax above 5 per cent in 2026-27 – are also on the EFS list.
‘Good indicator’ of big council tax hikes ahead
Andy Pike, professor of regional development studies at Newcastle University, said the areas receiving EFS are “the ones having the most trouble”. They are also among the most likely to hike council tax above 5 per cent in April 2027, he said.
“Some may find they can’t meet the legal requirement balance their annual budget without the need for a big temporary council tax increase [above the 5 per cent cap],” he said.
“I’d be amazed if they weren’t having those conversations with MHCLG [Ministry for Housing, Communities and Local Government].”
Dr Kevin Muldoon-Smith, associate professor in public sector finance at Northumbria University, said: “Some of those with EFS may also have to ask for a temporary increase over 5 per cent.
“It’s a good indicator,” he added. “But it’s not a perfect indicator, because other councils may also want to go for large increases.”
Some London councils warn of huge increases
Dr Jonathan Carr-West, chief executive of the Local Government Information Unit (LGiU) think-tank, said he also expected more councils to “make the case” to go above 5 per cent next year.
“In theory, where you see that big financial pressure, you could see the need to increase council tax over 5 cent,” he said. “Although some of those councils [with EFS] may feel they have a plan to bridge the gap.”
Dr Carr-West expects the “huge majority” of councils across England to increase council tax by the 5 per cent maximum again next year.
A 5 per cent increase on the current average band D council bill of £2,392 would add an extra £120 onto typical bills next year.
But the bill hikes could be far more painful if councils go beyond 5 per cent.
Conservative-run Wandsworth Council is reportedly discussing whether to raise council tax by as much as 160 per cent – adding an extra £814 to a typical band D bill.
Fellow Tory council in Westminster has raised the prospect of an increase of up to 100 per cent, adding £537 a year to typical band D bills.
Housing Secretary Angela Rayner has changed funding formulas (Photo: Reuters/Toby Melville)These areas are facing huge funding shortfalls after Housing Secretary Angela Rayner changed the formula that divided up how much Whitehall money goes to each council.
The fair funding review aims to get more cash to areas with higher needs, with councils in London and south east of England losing most from the changes.
But experts are sceptical about council tax bill rises of anything close to 100 per cent. Raising the possibility of such huge hikes could be a way of blaming the Labour Government for funding woes, they said.
“It seems extreme sabre rattling – I think there will be quite a bit of politics to it,” said Pike. “I can’t see how Government would allow it.
“You could see that sort of fairly large increase of 10 per cent as a way to allow them to catch up. But much more than that seems unlikely.”
Tory councils could see biggest rises
Local authorities across London – not just the ones already given permission to raise councils tax above the cap – are among the most likely town halls to go beyond 5 per cent in April, experts warned.
Max Caller, who led the crisis team that helped Birmingham City Council recover from bankruptcy, said: “All of the London boroughs are going to be interesting to watch, because of the transfer of funding away from them.
“They may be the most keen to go above the cap,” Caller added.
The Conservative-run councils which have traditionally kept their council tax rates low may be the most likely to seek permission to raise bills over the cap, said finance experts.
“It may be that those who need it do it [increase over 5 per cent] are those mostly Conservative councils that froze council tax for many years since 2010,” said Pike.
“They have a large tax revenue gap to fill compared to other councils that have increased their council tax annually to keep up with rising costs.”
Gareth Bacon, the Tories’ shadow minister for London, said Labour’s fair funding changes meant some councils in the capital could be forced to raise council tax “significantly”.
He added: “And that is exactly what they [Labour] want, because tax hikes are at the heart of Labour’s agenda.”
An MHCLG spokesperson said the Government was “fixing an outdated funding system so funding goes where need is greatest”.
Town halls’ internal discussions to decide on council tax rises for April don’t typically start until the winter, usually between November and February, The i Paper understands.
Among the councils receiving EFS money, Barnet, Havering, Thurrock, Wirral, West Berkshire and Worthing said no decision on tax increases had been made yet. Isles of Scilly and Slough councils said current planning assumed a council tax increase of 5 per cent next year.
Adam Kent, deputy leader of Worcestershire County Council, said the administration was “committed to keeping any council tax increase for 2027/28 below the 5 per cent threshold”.
The MHCLG added: “Local authorities decide the level of council tax they wish to set, but we are clear that in doing so they should put taxpayers first.”
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