Sam Dunn: 'My neighbour received a council tax rebate – am I eligible too?'

House Doctor

Question: My neighbour who lives in an almost identical house to me told me she'd recently managed to secure a rebate of more than £1,200 on her home. This was down to a mistaken council-tax house band, she said, but when I asked her more about it, she'd had help from friends and couldn't explain it properly: does everybody qualify for money back, or have I got the wrong idea? DT, Southampton

Answer: You've stumbled across an unusual financial flaw: council tax might feel like it's set in stone, but challenges to poor bill-calculation methods have yielded rebates for thousands of homeowners.

Remarkably, many of us live in homes set in the wrong council-tax band – from the cheapest, A, through to the most expensive, H – and have effectively been overpaying since 1991 when they were introduced. It's down to faulty valuations made when homes weren't properly assessed in the early 1990s, often leaving homeowners paying more council tax than their neighbours, despite living in the same-sized homes to them.

Hard-pushed councils desperate to finish the job hired staff who – instead of properly inspecting property values – opted for "second gear" valuations, so called because agents drove past people's homes in second gear, erroneously allocating tax bands, rather than stopping to get out and do the job thoroughly. Despite the problems, acknowledged by the Valuation Office Agency, plenty of homes in England and Scotland remain in the wrong tax band (the Welsh Assembly revalued all its properties in 2005).

Moneysavingexpert.com's Martin Lewis, who has campaigned to encourage more households to check their council-tax band, says you could be due a refund. "A flawed valuation could still dictate your band, which is why you could be paying more than your neighbour even though you live in exactly the same size house as them," he says.

It shouldn't take you more than 20 minutes to check your council-tax band and then challenge your council to a rethink, and possible rebate: if backdated all the way back to the early 1990s, it could be worth thousands of pounds, Lewis adds.

First, check your own council-tax band at voa.gov.uk and type in your postcode; for Scotland, try the Scottish Assessors Association at Saa.gov.uk. Next, using the same website, check the band of neighbouring or nearby properties in your street that match yours closely in size to get as accurate as possible a comparison.

Alternatively, ask next door what their council-tax band is, although not everybody knows and some may even resent such a demand. You'll now need the price of the most recently sold home similar to yours in your street: try nethouseprices.co.uk. With all this information, you can check how much your property (or its equivalent) cost in 1991, and see if you're in the correct band.

Go to Nationwide building society's House Price calculator at nationwide.co.uk/hpi/calculator.asp and – where it says "valuation Date 1" – enter your street's most similar recent house price. Where it indicates "valuation Date 2", put in 1991 and pick "Q2" – the second quarter of that year. Finally, choose your region from the drop-down list, hit "CALCULATE" and you've got an estimate of what your house was worth in 1991 and can check its band against the official rates at voa.gov.uk/council_tax/bands_england_ wales.htm.

In a lower band than charged currently? Contact your "local listing officer" found on the VOA website to say you believe your council tax banding list is incorrect, and you're asking that it be corrected. Where possible, use an official reason to make your complaint: a full list is at Voa.gov.uk/council_tax/can_i_ appeal.htm.

Watch out, though, if your neighbourhood has been spruced up over the years, or you've added value through a conservatory or other extension: you could actually end up paying more if you challenge your banding, so do your research carefully.