How the TV Licence Fee Is Set
The DCMS Secretary of State decides the fee. Parliament rubber-stamps it. The current CPI-linked settlement runs to December 2027, when the BBC Charter ends.
The 30-second answer
The fee is set by DCMS funding settlements with the BBC, under powers in the Communications Act 2003 and the BBC Royal Charter. The current settlement (2022, amended 2024) freezes-then-CPI-uplifts the fee through to the Charter expiry on 31 December 2027. The 2026 fee of £180 is the result of a CPI-linked uplift from £169.50.
The legal framework
The TV licence is a creature of three documents working together. The Communications Act 2003 section 363 establishes the requirement to hold a licence to install or use a television receiver. The Wireless Telegraphy Act 2006 Part 4 sets the offence framework and the maximum penalty of £1,000 in a Magistrates' Court. The BBC Royal Charter and accompanying Framework Agreement, both renewed every Charter period, establish the BBC's funding entitlement and the role of DCMS in setting the fee.
The Secretary of State for Culture, Media and Sport has the statutory authority to set the fee, after consulting the BBC. The change is implemented by Statutory Instrument under section 365 of the Communications Act. Parliament has the opportunity to object via the standard SI procedure but rarely does in practice; the political battles play out earlier, in the DCMS-BBC settlement negotiations.
The current Charter, signed in late 2016, runs for 11 years from 1 January 2017 to 31 December 2027. The funding model within that Charter has been adjusted twice: once in the 2016 settlement that took effect with the Charter, once in the January 2022 settlement that imposed the two-year freeze, and again in the 2023-24 CPI restoration agreed alongside the second half of the Dorries settlement.
A timeline of recent settlements
2010: ring-fenced freeze (Coalition)
The Coalition government froze the fee at £145.50 from 2010 to 2016 as part of broader public-spending restraint. The BBC absorbed new responsibilities (World Service, BBC Monitoring, S4C) from general taxation into the licence fee in return for the freeze.
2016: CPI link (Charter renewal)
The 2016 settlement, agreed alongside Charter renewal, restored an inflation-linked uplift mechanism. The link was to CPI, applied annually from April. This produced steady single-digit-percentage increases each year from April 2017 to April 2020.
2020: free-over-75 transfer
The 2015 settlement had agreed that the BBC would take over funding the free over-75 licence from general taxation by 2020. In June 2020 the BBC announced that the universal free licence would end on 1 August 2020 and be replaced with a means-tested concession for over-75s on Pension Credit. This was politically contentious but operationally a fee-funding decision rather than a fee-setting one.
January 2022: two-year freeze (Dorries)
The Culture Secretary Nadine Dorries froze the fee at £159 from April 2022 to April 2024, breaking the CPI link. The freeze was framed as cost-of-living relief but was politically contested. The BBC stated it represented a roughly 30 per cent real-terms cut over the Charter period if continued.
December 2023: CPI restoration
The DCMS announced that the CPI link would resume from April 2024, ending the two-year freeze. The April 2024 fee rose from £159 to £169.50 based on the September 2023 CPI figure (capped at the relevant percentage), and the same formula was applied for April 2025 (no change, £169.50) and April 2026 (£180, a 6.2 per cent uplift).
2026-27: Charter review begins
A public Charter review process is expected to launch in 2026, leading to a new Charter taking effect from 1 January 2028. The funding model is the central question. Options under discussion include continuation of the fee with various uplift mechanisms, conversion to a household media levy similar to Germany's Rundfunkbeitrag, partial general-taxation funding, subscription tiers for some BBC services, or hybrid models.
The CPI formula in detail
The current uplift mechanism is straightforward in principle. Each year the September CPI figure published by the ONS is used to calculate the next April uplift. The settlement letter from DCMS specifies the formula and any caps. For the 2026 increase, the September 2025 CPI figure (published in October 2025) produced a percentage uplift that, when applied to the £169.50 starting fee and rounded to the nearest 50 pence, gave £180.
There are some real-world details. The uplift is rounded to the nearest 50p (sometimes the nearest £1) to keep the fee at a manageable round number. The settlement also includes a floor (the fee cannot fall in cash terms even in a deflationary year) and historically has included caps in extreme inflation scenarios, though no cap has actually bound in recent years.
The B&W licence is calculated separately using a fixed ratio to the colour licence, currently around 33.6 per cent. So the 2026 B&W fee of £60.50 follows automatically from the colour fee of £180. See our black and white TV licence cost guide for the full B&W breakdown.
Where the money goes
The BBC publishes a detailed breakdown each year in its Annual Report and Accounts. In broad terms, around 75 per cent of licence-fee income funds BBC public services (TV channels, radio, online, news, regional programming, BBC Sounds, iPlayer infrastructure). The remainder funds: BBC World Service (transferred from FCO funding in 2014), S4C (the Welsh-language broadcaster), Local TV (a small grant pilot inherited from the 2010 settlement), BBC Monitoring, and Local Radio commitments.
Around 4 to 5 per cent of total income is spent on licence-fee collection itself, including TV Licensing operations (run by Capita under contract), enforcement, and customer service. This is a recurring point of public debate; in real terms the cost has fallen over the past decade as Direct Debit penetration has risen and detector-van enforcement has wound down.
A common misconception is that the fee funds the UK government. It does not. Licence revenue is hypothecated to the BBC and the listed beneficiaries under the Charter and Framework Agreement. The Treasury does not receive licence revenue. Conversely, the BBC does not appear in standard government expenditure limits, which is part of why the fee model has survived multiple changes of government.
The 2027 Charter review
The single most important date for licence-fee policy is 31 December 2027, when the current Charter expires. A new Charter must be in place by 1 January 2028. Charter renewals are major political events; the 2016 renewal took roughly three years of public consultation and Whitehall negotiation.
The funding model is the central question. Options publicly discussed by ministers and BBC leadership include: (a) continuation of the licence fee with various uplift mechanisms, (b) a household-based public-service media levy similar to Germany's Rundfunkbeitrag (which is collected from every household regardless of TV ownership), (c) partial or full general-taxation funding, (d) subscription tiers for some BBC services (most likely iPlayer and BBC Sounds for non-news content), (e) hybrid models combining the above.
No model has been confirmed as of May 2026. The DCMS published an initial Green Paper consultation in early 2026 and a White Paper is expected in late 2026 or early 2027. Whichever model is chosen, the practical impact on UK households could be significant. For the moment, the £180 fee continues under the current settlement.
Not legal advice
For your specific situation, check tvlicensing.co.uk, or read the DCMS BBC funding settlement publications directly.