Labour has been urged to consider council tax reforms that could raise bills by a staggering 410% in some areas. The Institute for Fiscal Studies (IFS) argues the current system is "outdated" and the council tax bands need to be revised based on house prices today.
If the move went ahead, some constituents' bills would soar by thousands of pounds a year, the Daily Mail reports. People living in London or the South East would be the biggest losers, with annual bills to rise by a staggering £4,645. The North would benefit the most, with some areas seeing bills slashed by as much as 60%. Stuart Adam, one of the authors of the original IFS report published in 2020, told the Daily Mail: "The Government should use our report as their blueprint for reforming the outdated council tax system. The failure to revalue council tax for 34 years - and counting - means the tax bills households face bear less and less relation to the values of their properties."
Council tax payments depend on the property's band, which is determined by the value of the home as of April 1, 1991, and these bands range from A to H.
However, the system has come under fire in recent years following various campaigns from Money Saving Expert Martin Lewis raising awareness about the inaccuracies of the banding.
To implement council tax quickly after the poll tax was scrapped in 1990, the Government used a "stop-gap valuation", which involved estate agents driving past properties and estimating values - often rushing through hundreds of properties in a week, sometimes all in a single day. This hasty process has cast doubt on the accuracy of many bandings, and some households have actually been overpaying for decades.
If Labour went ahead with the IFS's proposals to revalue banding based on today's house prices and apply a percentage tax rate to them, the following 10 areas would see the largest increase in bills:
- Westminster - 410% increase
- Kensington and Chelsea - 358% increase
- Wandsworth - 166% increase
- Hammersmith and Fulham - 166% increase
- Camden - 155% increase
- City of London - 150% increase
- Hackney - 110% increase
- Islington - 107% increase
- Richmond upon Thames - 101% increase
- Merton - 91% increase.
Meanwhile areas such as Kingston upon Hull, Stoke on Trent, and Blackpool, would see bills drop by as much as 60%, 57%, and 56% respectively.
At present, the London Borough of Wandsworth pays the least amount of council tax in the UK, with average band D households paying around £998 per year.
This comes despite Rightmove data showing house prices in this borough average around £756,091.
Meanwhile, Rutland, in the East Midlands, pays some of the highest rates for council tax, with average band D households paying around £2,671 per year. According to Rightmove, house prices in this constituency average around £434,694.
Labour ruled out changing council tax bands in England during its election campaign last summer, with Chancellor Rachel Reeves stating the party did "not want to see the tax burden on working people increase".
However, Wales has already announced plans to carry out a reevalution of property prices in 2028. The Leader of the Opposition, Kemi Badenoch, warned that due to this, changes could still happen in England in the coming years.
What is council tax?Council tax is levied on all properties in Great Britain (England, Scotland, and Wales), and it is set by local authorities to pay for services.
This includes things like schools, roads, libraries, support for vulnerable children and adults, rubbish collections, and the police, fire services, and other local services.
How much a household pays in council tax depends on what band their property is. Bands are determined based on the value of a person's home, and these bands range from A to H by the Valuation Office Agency.
Today's banding is based on the value of a person's home on April 1, 1991.
- Band A - property value up to £40,000
- Band B - property value over £40,000 and up to £52,000
- Band C - property value over £52,000 and up to £68,000
- Band D - property value over £68,000 and up to £88,000
- Band E - property value over £88,000 and up to £120,000
- Band F - property value over £120,000 and up to £160,000
- Band G - property value over £160,000 and up to £320,000
- Band H - property value over £320,000.
