It’s that time of year…budget setting!

You may have already made a start in thinking about the financial needs of your council for 2026/27 but here are some tips that might help you on the way!

The budget helps the council plan spending for the upcoming financial year, and also serves to inform the precept, which, simply put, is the local council tax required to meet the council’s budget requirements after other council income has been considered.

Budget Setting

A budget is usually pulled together by the Responsible Financial Officer (RFO), in consultation with councillors and electors. Factors to consider might include.

• Projected expenditure for the current fiscal year
• The ongoing costs, such as salaries, maintenance work and inflationary pressures
• Staff salary increases, percentage uplift and incremental changes.
• Changes in anticipated expenditure in 26/27 compared to the current year (for example, one off charges in 25/26)
• New activity/projects already known for 26/27.
• Election expenses
• Revised priorities of the council
• Wider community needs for a grant giving council.
• Reserves – earmarked and non-earmarked

It’s also a good time to look at your insurance policy and make sure it is up-to-date.  Check that the policy takes account of any newly acquired capital items and any no longer held, as well as estimated values. You may also want to consider whether it covers you for all the activities that your council is doing.

Anything we know of now for 2026/27?

• We know that Local Government Reorganisation is a current key factor going forward. At the time of writing, we do not know what Devon’s model will look like.  However, DALC is encouraging town and parish councils to establish their communities priorities now so that they will be in a financial position to respond to whatever comes your way.  It may be that some community priorities require additional funding and so may need to be considered for your budget; it may just be that councils want to consider growing their staffing budget now to allow for extra staff when needed.
• Any new local events, or new community pressures.
• Salary increases for all members of staff may be expected under the 2026/27 pay agreement (due next year), increase in minimum wage, and any incremental increases.

The budget will be an estimate of the known and unknown, so it is useful to have reserves and plan for the unexpected.

Consultation is a key component

Consultation can take many formats and be with a number of different groups. While the RFO might set the budget, councils might normally include informal, or formal, discussions with councillors at council or committee meetings. These discussions can cover anticipated priorities for the coming year.

Councils may also want to consider consulting with the community, whether that’s participatory budgeting, or just checking what community priorities there may be. Some topics may have come up at the Annual Parish Meeting, or during the council’s other engagement with the community throughout the year.

Building up the Budget

Where do we start? It is a logical exercise and what the budget looks like may differ from council to council.  We have set out an example which may be helpful to you.

• Column one: Final accounts for income and expenditure (or receipts and payments) for the previous financial year (2024/25)
• Column two: Your 2025/26 budget
• Column three: The forecast income and expenditure (or receipts and payment) for the current year to the end of this year (31.03.26)
• Column four: A proposed budget of income and expenditure for 2026/27

Example 

 Setting a Precept

The local council’s precept is part of the total council tax levied on electors in the local council area. It is the difference between the council’s estimated income from other sources (such as from rent, grants etc.) and planned expenditure for the year. Every council has the power to levy a precept each fiscal year.

There is currently no cap on parish and town council’s precept (unlike district and county councils), but the government reserves their right to consider extending referenda principles to local councils (i.e. putting on a cap so you would need a referendum to raise your precept). Accordingly, local councils are advised to exercise restraint when increasing their precepts, especially when the rise is not linked to taking on additional responsibilities.

We would always suggest that significant rises in the precept are less likely to be challenged if there is engagement with the community to explain why the precept is going up, and what it will be funding.

The precept must be approved at a meeting of the full council and cannot be delegated to a committee or an officer, even if a committee of the council has worked on the budget. It is important that the budget is agreed before the precept as it is the budget which informs the precept.

In law, your precept demand must be submitted to your billing authority (your district, borough, or unitary council) by 1st March although some authorities may request it earlier.

It is widespread practice for councils to set their budget and precept in December or January. Your district council’s time frame may have an impact on when the budget and precept need to be finalised.

Ongoing monitoring of budget

The council will also need to have a budget monitoring document that is presented to the council at regular intervals to inform councillors of any overspends or underspends; this is a key internal control document to ensure that councillors have an overview of the council’s accounts throughout the year. The RFO might prepare this for their council, and can always add notes to explain financial situations (for example – the council may have spent less on bus shelter maintenance than expected because it hasn’t been needed).

If there is an overspend, or a projected overspend, in the budget, the council can decide to vire some money from one budget cost centre to another.

Further information

As with all things to do with finance, the Practitioners Guide for the year may be helpful. We also have budget training available through The Parkinson Partnership.

Join us at our 2025 AGM, Conference, and Exhibition where you can join a workshop with some member councils who have put up their precept and how they worked with their community to explain the rises!