A significant overhaul of the UK's property tax system could lead to lower council tax bills for the vast majority of households, according to a new report from a leading think tank.
The Case for a Fairer System
The Institute for Public Policy Research (IPPR) has published a new analysis arguing that the current council tax system is outdated and unfair. They highlight the anomaly where a homeowner in an affluent area like Kensington could pay less council tax than someone in a less expensive location like Blackpool.
The IPPR's proposed reforms aim to rebalance this system by asking those with the most valuable properties to contribute more. The think tank suggests this would make the tax system fairer for working families while raising essential funds for local services.
Key Proposals and Financial Impact
The central proposal involves increasing taxes on higher-value property bands. Specifically, the IPPR recommends a 50% increase on council tax for bands F and G. These bands represented properties valued between £120,001 and £320,000 in 1991.
For the highest band, H, which includes many homes now worth over £1.5 million, the report proposes a 100% increase. Combined, these changes are projected to raise an additional £3.9 billion in revenue.
Of this new revenue, around £1 billion would be used to reduce council tax bills for properties in bands A to D. This would result in an average saving of £45 per year for approximately 80% of households, effectively cutting their bills by about 3%.
Broader Reforms and Political Context
Alongside the council tax changes, the IPPR also advocates for a rise in the non-resident buyer surcharge, proposing an increase from the current 2% to 6%. This measure is designed to curb speculative investment in the housing market.
These recommendations come at a time when the Chancellor, Rachel Reeves, is reportedly considering new taxes on expensive homes as part of the upcoming Budget. Other options said to be under review include creating new, higher council tax bands or imposing capital gains tax on the sale of high-value properties.
Aditi Sriram, an economist at IPPR and the lead author of the report, stated: "Our proposal cuts bills for the vast majority of households while asking those with the greatest property wealth to pay a fairer share. It's a reform that supports working families, strengthens local services, and lays the foundations for a fairer tax system."
Carsten Jung, IPPR associate director for economic policy and co-author, added that this reform would provide immediate relief, especially in less prosperous parts of the country, aligning with a government focus on reducing the cost of living.
A HM Treasury spokesperson responded by reiterating the Chancellor's commitment to building strong economic foundations and addressing the priorities of cutting waiting lists, national debt, and the cost of living.
