A recent report suggests that by increasing property taxes on wealthy individuals, it could generate £3.9 billion in revenue and lead to a reduction in council tax for the majority of households. The Institute for Public Policy Research (IPPR) proposes reforming property tax to lower council tax bills for 80% of households, making the system more equitable and providing funds for essential public services.
The IPPR argues that the current council tax system is outdated, resulting in discrepancies where homeowners in different areas pay varying amounts. Under the suggested reforms, only the top 10% of homes would experience an increase in their council tax.
Council tax is currently calculated based on a property’s valuation band, determined by its value in 1991 in England and Scotland, and 2003 in Wales. The IPPR recommends a 50% increase in tax for bands F and G, and a 100% increase for the top band H homes, valued at over £1.5 million today, aiming to raise £3.9 billion. Approximately £1 billion of this revenue would be used to reduce council tax bills for lower bands A to D, potentially saving households an average of £45 each.
The proposed reforms aim to create a fairer council tax system by ensuring that those benefiting the most from property value appreciation contribute proportionally more. Additionally, the IPPR suggests raising the non-resident buyer surcharge from 2% to 6% to deter profiteering from short-term housing market price increases.
In line with these proposals, Chancellor Rachel Reeves is considering introducing new higher council tax bands targeting owners of expensive properties. Other options being considered include levies on home values or capital gains tax on the sale of high-value properties.
Aditi Sriram, an economist at IPPR, emphasized the need for a fair and efficient council tax system that supports working families and enhances local services. Carsten Jung, IPPR’s associate director for economic policy, sees this reform as a step towards a more balanced property tax regime, potentially reducing bills for millions of families, particularly in less affluent regions.
A spokesperson from HM Treasury highlighted the Chancellor’s commitment to addressing economic challenges in the upcoming Budget, focusing on priorities such as reducing waiting lists, national debt, and the cost of living to secure Britain’s future.
