Six councils including five in London have been granted flexibility to increase council tax by more than five per cent in 2026/27 however some have said they won't do it
07:30, 20 Dec 2025
Two London councils have suggested they don't intend to impose large council tax rises on residents in 2026 despite being named among six in England that are allowed to breach the five per cent limit.
Six councils, five of which are in London, have been given the green light to increase their taxes above the five per cent limit for at least the next two years. Councils typically have to either hold a referendum among residents or get special dispensation from Government to go beyond the five per cent ceiling, though both of these have been waived for other local authorities in the past.
The six local authorities given special permission are:
- Westminster City Council
- Wandsworth Council
- Kensington and Chelsea Council
- Hammersmith and Fulham Council
- City of London Corporation
- Windsor and Maidenhead Council
None of the five London councils have finalised their 2026/27 council tax rates so can't say for sure what they will be at this stage and most have given no clear indication of whether they'll go above a five per cent rise, and if so, by how much.
Cllr Adam Hug, the Labour Leader at Westminster City Council, said the local authority is already taking "proactive steps" to deliver more efficient services, and that it will "continue to make every effort to keep council tax as low as possible".
He told the Local Democracy Reporting Service (LDRS) the council was still "digesting" the news and ruled out above-threshold rises "in the immediate future" suggesting the coming tax year, starting in April 2026 won't see a big rise. The authority hasn't ruled them out in future years.
Hammersmith and Fulham said at a time when residents are struggling with the cost of living it will "not burden them with extraordinary new tax rises", while Kensington and Chelsea decried the plans as "a deeply disappointing response" from Government to requests for more funding. Kensington and Chelsea, however, has not ruled out a large council tax rise in April.
The City of London Corporation did not rule out a bumper tax rise either, saying they will "look carefully at council tax in due course". Wandsworth Council declined to comment. The sixth, Windsor and Maidenhead in Berkshire, was not contacted but was already considering an above five per cent tax rise in 2026/27 before being given the extra flexibility.
Fair Funding Review outcome
The move comes amid wider changes by the Government to the funding of councils across the country in an effort to direct more resources to those most in need. To be phased in over three years from 2026 it will take greater account of spending requirements and councils' abilities to raise revenue.
Inner London local authorities are among those expected to lose out the most under the changes, which is thought to be why they have predominantly been chosen as the ones to be given flexibility around council tax.
Kensington and Chelsea says it's now expecting a £108 million budget gap over the next four years - a £26m increase on previous estimates. The West London council previously predicted an £82m shortfall but scaled up their estimate after the new formula was released on Wednesday (December 17).
The LDRS also revealed how Hammersmith and Fulham Council had projected a £34m gap in 2027/27, partly due to the plans. Since then there have been tweaks to the formula, such as including housing costs when calculating deprivation.
According to a Government release the most deprived 10 per cent of councils will see a 24 per cent boost per head to the funding available as a result of the reforms. The six councils able to hike tax above the five per cent rate, however, remain among those to see the largest hits to their funding.
The BBC has reported that the areas were identified to allow for greater flexibility over council tax increases due to their particularly low rates.
'A deeply disappointing response'
Elizabeth Campbell, Leader of Kensington and Chelsea Council, said: "This is a deeply disappointing response from a government using tax as the answer, again. We are already having to consider increasing council tax by five per cent next year, and we are already having to consider bringing 8,000 people on the lowest incomes into paying council tax for the first time.
"We may have wealthy neighbourhoods but we also have one of the most deprived areas in London. Many will not be able to afford the exponential increases that the government appears to be proposing."
Westminster City Council said it did not ask the Government for the council tax threshold to be removed.
According to the authority, it faces spiralling temporary accommodation and homelessness costs. It's pushing for a 50 per cent cut of the tourist tax being proposed by the Government, saying it spends vast amounts ensuring world-famous tourist hot spots are looking their best and gets no additional support.
Cllr Hug said: "Along with other Central London councils, we have been engaging with Government as part of the Fair Funding Review. We have argued Westminster's case at the heart of the capital and are glad our arguments were accepted to include housing deprivation costs as part of the formula, with almost half of our residents living in poverty.
"We are already taking proactive steps to deliver an ambitious transformation plan to make our services more efficient and drive savings. We will also continue to press the case for a share of the overnight levy [tourist tax] to help pay for services which support the millions of people who visit Westminster every year.
"We will continue to make every effort to keep council tax as low as possible."
Pointing to analysis by the Institute for Fiscal Studies, which warned of an eye-watering 75 per cent increase in council tax in Wandsworth and Westminster, Conservative opposition Leader Paul Swaddle said: "Whatever Adam Hug and the Labour-run council may say, the Labour Government is clear that they want to see a 75 per cent council tax rise over the next four years. On taxes, it is the same old Labour."
'Always put their interests first'
Hammersmith and Fulham Council's Labour Leader, Stephen Cowan, highlighted the local authority's low tax rate despite years of austerity, adding that when residents are struggling with the cost of living, "we will not burden them with extraordinary new tax rises".
He continued to note the council's policy of 'Ruthless Financial Efficiency', which he said is "based on the disruptive view that government is too often wasteful, slow to innovate and adapt, is short-termist and is process rather than outcomes orientated".
Cllr Cowan continued: "Since 2014 our hard-nosed approach has produced a record £138m of savings - at a time when the Conservative-led governments slashed our funding by 54 per cent in real terms. We have also produced London's fastest growing economy through our groundbreaking industrial strategy.
"Our robust financial stewardship has been independently reviewed and recognised for producing extraordinary results by both our external auditors, Grant Thornton, and the recent Local Government Association Finance Peer Review. We believe that if previous national governments had taken the same approach to financial efficiency and economic growth, then the UK's public finances would not be in the parlous state they are now.
"Residents value Hammersmith and Fulham Labour's commitment to financial efficiency and appreciate how it has enabled us to maintain low council tax levels year after year. We would like to reassure our residents that we will always put their interests first so we will continue to protect the services that matter to them and do so above all other concerns."
Cllr Jose Afonso, the opposition Conservative Leader in Hammersmith and Fulham, claimed that when Labour negotiates, "our residents lose".
He told the LDRS: "Under their Government our budget is being slashed. First they denied it was happening, then they denied there was a likely budget gap as a result of it - but now we know the truth. Having exhausted our reserves and balances and failed to negotiate with their friends in government, the door is now open for massive council tax increases."
A spokesperson for the City of London Corporation said: "Council tax decisions are made by the City Corporation's elected Members, who will consider a range of options. Under the new funding model, they will look carefully at council tax in due course as part of setting the budget.
"Our aim is to provide high-quality, efficient services for workers, residents and visitors."
Commenting on the reforms, Secretary of State for Housing, Communities and Local Government, Steve Reed, said: "This is a chance to turn the page on a decade of cuts, and for local leaders to invest in getting back what has been lost – to bring back libraries, youth services, clean streets, and community hubs.
"Today we're making sure every community has the funding they need to succeed."
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