The base for the tax is residential property. Each dwelling is allocated to one of eight bands coded by letters A through H on the basis of its capital value. Each local authority sets a tax rate expressed as the annual levy on a Band D property inhabited by two liable adults. This decision automatically sets the amounts levied on all types of households and dwellings.
Although it is the only tax which is set by local government, the Council Tax contributes only a small proportion of local government revenue. The majority comes from central government grants and from business rates which are collected centrally and redistributed to local authorities.