Council tax bills are expected to rise by up to 5% each year to help fund local services, according to documents from the government's latest Spending Review. The review also suggests

additional increases may be needed to support police funding.

While local authorities can choose how much to raise council tax—up to a 5% annual cap—many have opted for the maximum in recent years due to ongoing financial strain. The Spending Review assumes councils will continue to raise tax to the full limit.

The review provides a modest 1.1% increase in direct government funding to councils, but projects overall council “spending power” to rise by 2.6% when factoring in local tax revenue and business rates.

If councils wish to exceed the 5% limit, they must hold a local referendum or receive central government approval.

Chancellor: 5% Is a Cap, Not a Requirement

Chancellor Rachel Reeves clarified that councils are not required to implement the full 5% increase. Speaking to BBC Breakfast, she said:
“It is a cap—councils don’t have to increase council tax by 5%. That’s to invest in things like social care, but also, as is normal, to put money into policing.”

Council tax helps fund a wide range of services including social care, waste collection, libraries, and street cleaning.

Police Funding and Precept Increases

The Spending Review also anticipates police spending power will grow by 2.3% a year in real terms. This includes a projected increase in the police precept—a component of council tax used to fund local police services.

Police and Crime Commissioners can increase the precept by £14 for a Band D property without needing a public vote. This is separate from the general 5% council tax rise.

Treasury documents confirm the projected police funding increase relies on this assumed precept rise.

Police leaders have voiced concern that any additional funds will quickly be absorbed by officer pay demands. Tiff Lynch, acting chair of the Police Federation of England and Wales, said:
“This Spending Review should have been a turning point after 15 years of austerity... Instead, the cuts will continue and it's the public who will pay the price.”

Councils Under Pressure

Louise Gittins, chair of the Local Government Association, welcomed parts of the review—such as support for children’s services and housing—but warned councils still face “severe financial pressure.”

“Many will continue to have to increase council tax bills to try and protect services but still need to make further cutbacks,” she said.