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Homeowners face soaring council tax bills that will add more than £400 to the average annual bill

Households face paying hundreds of pounds extra in council tax by 2026, according to the government's own economic forecasters.

The Office for Budget Responsibility said it expected the total amount raised in council tax to be a third higher in 2026/27 than it was in 2019/20.

It said receipts will be £12.1billion higher in 2026/27 than seven years earlier. This is equivalent to around £435 extra per household.

Last year the average Band D council tax rate in England was £1,898.

This afternoon the Treasury said local authorities would be able to increase bills by a maximum 3 per cent without having to hold a local referendum, with 1 per cent of this going to social care.

That could see town halls increasing council tax bills by up to £57 in April – potentially taking the average to £1,955.

Beers all round: The Office for Budget Responsibility said it expected the total amount raised in council tax to be a third higher in 2026/27 than it was in 2019/20

It said receipts will be £12.1billion higher in 2026/27 than seven years earlier. This is equivalent to around £435 extra per household.

This is on top of the already-announced 1.25 per cent National Insurance rise to pay for health and social care.

Council tax has been rising markedly in recent years to help meet rising social care costs. As well as putting up bills to pay for general spending, town halls can add a 'precept' to pay for social care.

The OBR said: 'Net council tax receipts continued to rise in 2020/21 despite the pandemic (by 6 per cent) and are expected to continue to rise at similar rates across the forecast period.

'By 2026/27, we expect receipts to be £12.1billion (33 per cent) above their 2019/20 level.

'This largely reflects policy measures allowing councils to increase the adult social care precept on council tax bills, over and above the almost 2 per cent increases in core rates included in our baseline forecasts.'

The Treasury's Red Book, published alongside the Budget said town halls would be able to add a social care precept of 1 per cent on top of the 2 per cent they are allowed to put up bills without holding a local referendum.

This potential rise of 3 per cent is, however, less than in previous years.

Last year the precept was allowed to be as high as 3 per cent, meaning councils could put up bills by 5 per cent.

In the event, the actual average council tax rise was 4.4 per cent last year – taking the average Band D bill to £1,898.

The Red Book stated: 'To ensure that all local authorities have access to the resources they need to deliver core services such as children's social care, road maintenance and waste management, the referendum threshold for increases in council tax is expected to remain at 2 per cent.

'In addition, local authorities with social care responsibilities are expected to be able to increase the adult social care precept by up to 1 per cent per year.

'The Department for Levelling Up, Housing and Communities will set out full details of the council tax referendum principles and proposed approach to allocating grant funding through the Local Government Finance Settlement.'

The Institute for Fiscal Studies said the pressure on local authority social care services mean rises of more than 3 per cent may be needed.

A spokesman said: 'Bigger council tax rises than the government plans to allow could be necessary to maintain services.'

'A National Insurance tax rise - on working people,' she told MPs. 'A council tax hike – on working people.'