Council tax bills could rise by more than £100 next year as Labour keeps cap in place

Council tax could increase by more than £100 an average next year after Labour confirmed bills will be allowed to rise by a maximum of 4.99 per cent.

This means that households can expect rises at around three times higher than the current inflation rate of 1.7 per cent.

It was confirmed that the 4.99 per cent threshold would remain the same by Sir Keir Starmer's press secretary on Wednesday.

The increases could raise an additional £1.8 billion for councils in 2025/26, communities minister Matthew Pennycook has said .

But they will also pave the way for a £109 rise for the average band D annual council tax bill, which was £2,171 this year. For those in the most expensive band (H), the increase could go up £217 on average.

It's likely many local authorities will opt to raise council tax by the full 4.99 per cent in 2025, as 95 per cent of eligible councils did this year.

Many councils are struggling financially under the growing costs of public services.

One in four recently said in a Local Government Association survey that they were "likely" to need emergency support to not go bankrupt in the next two years.

Technically, the cap has remained at 2.99 per cent in recent years, with an extra 2 per cent permitted for councils with social care responsibilities. This accounts for 152 out of 317 councils.

Under special circumstances, authorities can also request to increase council tax by more than the cap. This year, Birmingham, Woking, Slough and Thurrock councils were all given special permission to raise the levy further.

Birmingham City Council opted for a 10 per cent rise, with council leaders saying they intend to do the same again in 2025 – representing a 21 per cent increase for residents over two years.

Responding to criticism during Prime Minister's Questions this weeek, Sir Keir blamed the Conservatives for the "absolutely catastrophic state" of local authorities.

Ministers will release the annual local governance finance settlement in December, revealing how much extra funding central government will give to cash-strapped.