HUNDREDS of thousands of homeowners could be paying over the odds for their council tax simply because the previous owner had an extension.

The council-tax system automatically upgrades homes once they have been extended, even if the extra space does not warrant them going up a band. This means that some homeowners may be paying hundreds of pounds a year more in council tax than they need to.

Consumer groups are urging people to check their banding, especially if they moved into a home with an extension, and claim back overpayments which could amount to £4,000 over the past 15 years – when the current system came into effect.

The typical three-bedroom house, classified as band D, pays around £1,214 in council tax year. Band E houses are charged £1,483 – £269 a year more.

When homeowners apply for planning permission for an extension, a mark is put on their council records which indicates that a rebanding may be required. This only takes effect when a new owner moves in.

However, the Valuation Office Authority (VOA), which calculates the banding, does not always send an inspector round to check how the value of the property has changed.

One Sunday Times reader, Peter Hewing, 63, from Poole, Dorset, said his three-bedroom house was increased from band D to band E when he moved in nine years ago. The previous owners had built a small one-storey extension which did not increase the number of bedrooms in the property.

He later discovered that only larger, four-bedroom properties in his area were in band E and was able to claim back about £2,000 of overpayments for the nine years he had lived at the property.

“When I moved in, I was simply told that my house had been flagged up as having had an extension built,” he said. “My lawyers told me that the band would increase from D to E. I just accepted this at the time.”

Hewing’s house is now worth about £350,000 – which is typical for three-bed properties in his area. Properties with four bedrooms, and classed as band E, are worth £400,000 or more.

A VOA spokesman said it would “only visit a property when absolutely necessary to minimise inconvenience for taxpayers, so it is not possible to say how many inspections relating to home improvements are undertaken”.

Last year, about 300,000 planning applications were made for home improvements, though not all would have related to extensions. Moneysavingexpert, the consumer finance website, estimate that as many as 400,000 homes may be classified in the wrong band.

A Communities and Local Government spokesman said: “Where overpayments of council tax have been made, it is of course right that taxpayers should be entitled to a full refund from their local council. Anyone who has evidence that they are in the wrong band can contact the VOA to request a review.”

Bills are set to jump by an average of 3.9% in April, with the average band D bill increasing by £47 to £1,261. The latest rise means that council-tax bills have doubled since Labour came to power. In 1997, the average Band D tax was £689.

While it is possible to claim back interest on income tax overpayments, no such rule exists for council tax.

The Local Government Ombudsman service said it received complaints about councils failing to pay interest but was unable to help. “The law, as it currently stands, means councils do not have to pay the interest,” it said.

Hewing attempted to claim back about £200 interest on his overpayments, but was refused by Poole council.

Ian Milner from the council, said: “While there is provision in existing legislation for the payment of interest on overpaid business rates, there is currently no such provision when it comes to council tax. We are not aware that the department of Communities and Local Government has any plans to change this.”

Mark Wallace, campaign director of the Taxpayers’ Alliance, said: “It’s bad enough that so many councils overcharge people, but it’s simply greedy of them to refuse to refund interest. If you owe the taxman money he will insist on a hefty interest payment, so it’s only fair that it works both ways. There should be a level playing field between taxpayers and public bodies.” Jenny Keefe of Moneysavingexpert said consumers should persist in reclaiming the interest, however. “Most councils do not pay interest automatically, but they might cough up when people write and complain,” she said.

“Some of our users have written and been turned down twice, and then got a cheque after the third letter.”

HOW TO CHECK YOUR BAND

- Every household is in a council-tax band from A to H, based on its 1991 value. Those in the top band, H, pay three times as much as band A. Most are in band D.

-Many properties have been wrongly banded since estate agents who undertook the valuations mis-priced them.

- If you think you are paying too much, check your banding against your neighbours’. Go to voa.gov.uk for England and Wales, or saa.gov.uk in Scotland.

- Find out the value of your property in 1991. Follow the instructions on moneysavingexpert.com/council.

- Banding appeals can be made online at the Valuation Office Agency in England, or the Scottish Assessors Association, in Scotland. Or write to your local authority.

- Your council will carry out a reassessment and could put your property in a higher band.

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