Chancellor Rachel Reeves is reported to be considering proposals to apply a 100% increase to the highest council tax bands, which would affect more than one million homes, predominantly in London and the South East of England.
According to a report in The Telegraph on Saturday, the chancellor ‘is said to be looking at’ plans put forward by the Institute for Fiscal Studies (IFS) in October, which could double the rate of council tax for properties in band G and H properties.
The proposals were shared by the IFS in its ‘Options for tax increases report’, part of its Green Budget 2025 analysis, which outlines ‘less damaging’ options for tax increases. ‘Council tax rates are already assumed to rise by 4.3% per year for the rest of the parliament; larger increases would be needed to bring in additional revenue’, the report notes.
The IFS suggests an alternative to raising all rates would be to increase rates on homes in higher value bands, which it says would make council tax less regressive. As council tax bands in England and Scotland are based on 1991 valuations, the increases would not accurately target the properties that are most valuable today, and the IFS believes ‘a sensible goal’ would be to move to a proportional tax in line with current valuations.
‘Council tax (before any discounts) is currently a lower percentage of property value for high-value properties than for low-value properties’, the IFS explains in its report.
“For example, properties in England in the top council tax band, band H, are charged three times as much as band A properties in the same local authority, despite being worth (in 1991) at least eight times as much and usually far more.
“This regressive rate structure is hard to justify.
“The government could change those relativities to increase the relative rates for high-band properties, making the tax more proportional to (1991) property values.”
Doubling the top two rates of council tax in England (those applying to bands G and H, around 4% of properties) would raise £4.2 billion in 2029–30, the IFS claims, and would present a ‘radical solution’ leading to a sharper increase for a smaller set of properties. However, the IFS acknowledges any additional revenue from council tax would flow to local authorities rather than central government, and suggests an alternative new national tax could be introduced to act as a top-up to council tax paid to central government.
“One possibility would be a national supplement to council tax rates, broadly analogous to that levied in London by the Greater London Authority, for example. Another would be a new surcharge on band G and H properties, charged at flat rates across the country.”
But the report warns ‘a major downside’ of any council tax increase or supplement, especially one targeted at the highest bands, is that council tax bands are still based on the values of properties in 1991.
‘Properties in the highest bands are not those that are worth most today, but those that were worth most in 1991 – a very different set’, the IFS said.
“In particular, properties in areas such as London (where average house prices are around seven times higher than in April 1991) are under-represented in top bands and properties in areas such as the North East (where average prices have increased only fourfold in the same period) are over-represented. A tax rise on band G and H properties would therefore not be hitting the most valuable properties.
“A revaluation is long overdue.
“On its own, bringing assessed values up to date would not raise revenue, but it would distribute the tax burden more fairly and make tax rates – and increases – less arbitrary.”
15 responses
Below is a list of what council tax is roughly spent on. I’m not necessarily against the wealthier pay more tax in general, but they don’t necessarily use more of the things that the money is spent on.
Should the wealthiest pay more council tax if they aren’t using the roads more, creating more waste or need social services more than anyone else? Their kids might even be in private education.
If you want to tax the rich more, is it not just fairer to increase the higher rate of income tax?
Adult and Children’s Social Care
Waste Management
Highways and Transport
Education
Public Safety
Leisure and Culture
Environmental Health and Regulatory Services
Housing Services
Administration Costs
If they do that there will be outrage and rightly so
The wealthier should pay more tax. Period. The wealthier have advantages of better access to tax efficient ways to manage their money and you can bet that they use it to the fullest. I’m on less than £50k and a huge amount of my earnings go on necessary matters. I certainly do not have the luxury of taking nice holidays, saving money, buying big fancy houses or spending a fortune on expensive cars/phones etc. I spend every month what I make. The tax system in this country makes sure that the rich get wealthier and the poor/less well off get less well off. Food bills, clothes bills especially for kids, utility bills, mortgage bills etc…my funds are dwindling but someone who is earning £100k plus a year can afford to contribute more. If you live in this country you use services in this country as far as I am concern and you should pay. I am all for a 100% increase.
Struggling to see how that relates to randomly making G band property owners pay a penalty for owning a G band property? Also to use an old cliche the trouble with socialism, is that in the end you always run out of other peoples money to spend.
They do contribute more – it’s called higher and additional rates of income tax, you make the mistake of assuming that anyone better paid than you is a tax dodging thief- get better educated
They already are paying more ….. through tax, these days through student loans etc.
You are also assuming people are in the right bands, based off valuations 35 years ago.
Most are not
I’m not wealthy!
We bought a house in 2014 worth only £250,000 and semi derelict and have lived in it with 5 children and no central heating for 10 yrs!
Our house was band D when the lady that sold it to us lived in it and it was whacked up to a band H when we bought it.
We currently have no income and are looking for new work and already struggling to pay around £3,800 a yr on a single income and if they bring this in, we couldnt possibly pay it and would default on payments and lose our home!
We’re not wealthy, and we tried to appeal the H band at the time when we bought it to no avail.
Your envy of wealthy people is clouding your judgement.
Many people will be hurt financially by this and probably lose their homes as the council doesnt mess around when you can’t pay your bills.
I would like to get central heating for my home so that my kids dont spend their entire lives in the cold- we might not even have a home next year if this goes through!
What if you rent in London where most property is over the threshold of band of G and H – many of us are not rich so how can we suddenly pay double council tax.
It means we will all have to move house yet again!
Randomly making people who own G band properties pay what would be an extra £4k (Liverpool) or £2400 (Hammersmith), all towards reducing the budget deficit is just crackers.
Owning a G Band property is not a reliable proxy for the owner’s wealth, net wealth or disposable income. That owner could be mortgaged to the hilt, caring for a family, living off a fixed income whilst the person next door in a similar band F property with millions in the bank is paying nothing extra, and the billionaire neighbour in the £10 million pound property is paying only an £1k compared to the G band owner.
Imagine what this will do to the value of G band property, future buyers will capitalize the additional cost in a lower offer, on an Net Present Value basis the hit could easily be £100-£150k as buyers will worry about how the extra cost will compound year or year and how it would effect future marketability. So the poor G band owners will be paying twice over- when they get the bills and when they sell!
How is it actually possible for supposedly intelligent economists to come up with ideas as bad as this one?
This is aside from the daftness of putting the entire responsibility for paying off the deficit on the middle classes, if you know someone else will carry the can for out of control government expenditure you will be happy to vote in favour it, People will only weigh up what the right balance should be, if they are bearing at least some of the costs of that decision. Currently is not the broadest shoulders carry their fair share its the shoulders of the randomly chosen few who seem to be carrying the ENTIRE share of the burden (for example G band owners, estates of the deceased, people who own 2nd properties, people who slip over £100k income etc).
Window tax anyone?
I own a property I paid 440k for in central Manchester. It is a large two bedroom apartment. I ceased to have a regular salary many years ago and rely for income on renting a room out. The ownership of a property worth above the national average does not imply disposable wealth and income to pay such huge increases. The only way to generate that income is to sell. Is that what this possible policy is designed to achieve? Who will want to buy a Band G apartment when they can avoid the tax hike and stick to F or lower? I’ll be stuck, unable to sell. By the way, currently the apartment is valued at 450,000 to 460,000… So the huge price hike associated with bricks and mortar does not apply here .
I worked hard my entire life, eventually I got into a position to be able to afford a property that just scrapes a G banding on value.
Now i have the fear overhanging of this increase in council tax I won’t be able to afford. Effectively being forced to sell, when nobody will want to buy as others mention.
The worst part is properties on the market worth significantly more than mine – less than a mile away have band E/F!
We brought a property in North Wales for 250,000 pounds in 2014.
It is a semi derelict property and a grade two listed property so cost more to restore.
We have lived in it for 10 years without central heating as we couldn’t afford it, with five children growing up in an unheated house, and all the restoration we have managed to do to the house is things like painting and decorating where we can.
The bathrooms only one of which works are around 100 years old each.
The roof needs complete replacement.
We stopped being able to mow the lawn this year as our lawn mower broke and we can’t afford to replace it so the place currently looks like a mess.
The previous owner was paying D band council tax, but when we bought it they slapped it up to h band so we are paying around 3,800 a year in Conwy.
We just lost our source of income, so are now looking for new contracts before we go broke, And are barely managing to pay our current bills.
How can they doom we can afford 8,000 pounds a year?
And for what?
Are kids are home educated and don’t even attend the local schools!
We get barely get anything for the council tax we pay already.
We literally won’t be able to pay 8,000 pounds a year!
We bought a property that we could afford to pay off and it only costs 250000 pounds.
We didn’t buy a rich person’s house, so how can they deem that we are rich and deserve to be slammed with double council tax?
We are a single income family and live within our means.
If we were rich we certainly would have restored the place completely over the last 11 years but it doesn’t look any different than it did from the outside when we bought it.
It’s still looks semi derelict.
We are never going to be able to afford to move ahead at this rate.
What a diabolically stupid plan!
And what about elderly people on a fixed income pension who paid the place of years ago who will now be slammed with a double council tax they can’t afford?
Why should they have to move out of the homes that their children were brought up in, and leave the garden that they have tended for 30 years and waited to see it grow into maturity?
They can’t possibly be serious about this the loses from lack of property movement will be huge, plus the poll tax sparked an uproar this is much worse as they will just work they way down the bands. Next stop for any band g & h owners a cosy tent on the streets of london.
A band G property does not make you wealthy. Wealth depends on all your assets and debts. If she proceeds with this ridiculous policy I will be protesting and hope others affected will join against this madness
Those with the wealth should pay more. Those with an average to low level of income have been taking the greatest hits over the last few years. Those that earn less than £50k (and I am sure that will be most conveyancers considering we are on a conveyancing forum) have been disproportionally impacted by high food shopping bills, higher energy bills, higher mortgage payments with little wiggle room and a continuing reduction of disposable income. People above are right; being asset rich does not mean that you are cash rich. BUT local authority’s are running out of money and central Government cannot pump the money in to top them up so what else do you do? We cannot keep asking those middle earners for more and more. We have a major problem with the age range of 30-50 odd. We have been through nearly 20 years of low growth, austerity, bills getting bigger, wages not rising as fast as they should be. The average earner cannot save for a rainy day, cannot upgrade their houses (either by buying a bigger one or buy adding value) or add to their pension pot. We are going to have a huge pension crisis in 20 years time when this generation suddenly realise they do not have enough money to survive retirement because they have not been able to save because our funds keep being eroded away.
Yes my wage has gone up (I am on less than £50k a year with 15 years conveyancing experience whilst being qualified) but has it gone up enough to pay for the increasing expenses each month? No. I have had to cut back on saving, cut back on investing, cut back on adding to the pension pot. I don’t spend money on cars I don’t spend money in the shops. I have an average wage with an average house price which is not increasing in value in fact it has done nothing in value in the 4 years I have had it. You can’t hit us anymore, you can’t take off the poorest in the society’s so you need to take from those that have it either in assets or in wealth.