Setting the precept: a clerk's walkthrough

The precept is the only part of the year where the council has to commit, in public, to a number that lands on residents' council tax bills. It is also the piece of the clerk's job most likely to be done under time pressure in January, using last year's spreadsheet, with a councillor asking what it means "per household" while the meeting is running.

It is much easier if the work is done in the right order. This is that order.

The one thing to establish first: your billing authority's deadline

Your district, borough or unitary council collects the money for you and needs your precept demand by a date it sets itself — commonly in the second half of January, sometimes earlier. Miss it and the consequences are serious: the billing authority may issue with your previous year's figure, or nothing at all.

Find the date now and count backwards. You need a council meeting that resolves the budget and the precept before it, with proper notice, and you need the papers circulated before that. In practice a January deadline means a December agenda item and November preparation.

Step one: know where this year is actually landing

Before forecasting next year, close off this one. Take your accounts to the most recent month end and produce a projected outturn: actual to date, plus a realistic estimate of what will be spent and received between now and 31 March.

The projected outturn matters for two reasons. It tells you what your closing balances will be, which is the opening position for next year's budget. And it exposes the lines where the current budget was simply wrong — which are the lines most likely to be wrong again if you copy them forward.

Step two: build the budget from the bottom, not from last year plus inflation

Uplifting every line by a percentage is quick, and it quietly bakes in every mistake in the existing budget. Build it properly:

• Staff costs. The largest single line for most councils. Include the pay award (which is negotiated nationally and often confirmed late), any change in the clerk's contracted hours, employer's National Insurance and pension contributions.
• Contracts and commitments. Grounds maintenance, grass cutting, cleaning, insurance, audit fees, subscriptions, software. Check what is actually in each contract rather than what you paid last year — several will have indexation clauses.
• Utilities and premises. Street lighting energy, village hall, pavilion, cemetery, allotments.
• Projects. Anything the council has resolved to do, and anything it is likely to. Be honest about which are funded from reserves and which need to come out of the precept.
• Income. Burial and interment fees, allotment rents, hall hire, bank interest, and any grants you are reasonably confident of. Do not budget for a grant you have not applied for.

Step three: decide the reserves position deliberately

This is where most precept arguments actually happen, usually without anyone naming it. There are two kinds of reserve and they behave differently.

Earmarked reserves are set aside for a stated purpose — a cemetery extension, play equipment replacement, an election. They should be listed, with an amount and a purpose, and reviewed each year. A reserve nobody can explain the purpose of is not earmarked; it is a general reserve wearing a label.

The general reserve is the council's working balance and its cushion against the unexpected. The guidance for smaller authorities points at a general reserve of somewhere between three and twelve months of net revenue expenditure, with smaller councils generally at the higher end of that range because a single unexpected cost is proportionally bigger for them.

Step four: get the tax base and do the arithmetic

Your billing authority will send you the tax base for the coming year, usually in late autumn or December. The tax base is the number of Band D equivalent properties in your parish — not the number of houses. It accounts for the different council tax bands and for discounts and exemptions, so it moves year to year even when nothing is built.

Two calculations follow, and between them they answer every question you will be asked at the meeting:

The distinction matters more than it sounds. If your tax base grows because new homes have been built, the council can raise the same amount per Band D property and still collect more money — the precept goes up while the charge on each household is unchanged. Conversely, a falling tax base means holding the precept flat is a real-terms increase for every household. Always work out and present both numbers.

Step five: the resolution and the form

The council must resolve the budget and the precept at a properly convened meeting, and the minute should be unambiguous: the total precept demand in pounds, and ideally the resulting Band D figure. "The budget was discussed and agreed" is not a resolution anyone can rely on twelve months later.

Then complete and return whatever precept form your billing authority uses, by their deadline, signed as they require. Keep a copy with the minute — you will want both when the AGAR asks you to explain the movement in Box 2.

A note on referendum principles

Council tax referendum principles — the rules requiring a referendum above a certain increase — have applied to principal authorities. Whether they extend to parish and town councils has been reviewed by government repeatedly and the position has changed over time. Check the current year's position with your billing authority or your county association before assuming either way, particularly if the council is contemplating a large increase.

Making next year easier

Two habits make the difference. Keep a short note against any decision that changes next year's costs, at the moment it is taken, so the budget builds itself as the year goes on. And write the reserves policy once — purposes, amounts, review date — so that the conversation each January is about the numbers rather than about first principles.

Always check your billing authority's own guidance and the current Practitioners' Guide, as deadlines, forms and thresholds are set locally and reviewed annually.