Raising property taxes for wealthier individuals could potentially generate £3.9 billion in revenue and result in reduced council tax for the majority of households, according to a recent report.
The Institute for Public Policy Research (IPPR) has proposed that restructuring property tax could lead to a 3% decrease in council tax bills for 80% of households, thereby creating a more equitable system and generating funds for essential public services.
IPPR contends that the current council tax framework is outdated, highlighting disparities where a homeowner in Kensington might pay less council tax than one in Blackpool. The suggested reforms would primarily affect the top 10% of properties, potentially increasing their council tax obligations.
Council tax is currently determined based on a property’s valuation band, which is assessed using fixed dates such as 1991 in England and 2003 in Wales and Scotland.
In the immediate term, IPPR recommends a 50% tax increase on bands F and G (valued between £120,001 and £320,000 in 1991) and a 100% raise on band H properties (likely exceeding £1.5 million presently) to generate the £3.9 billion target.
Of this sum, around £1 billion is proposed to be allocated towards reducing council tax bills for properties falling within bands A to D, potentially resulting in average savings of £45 for 80% of households.
The argument put forth is that these changes would make the council tax system fairer by ensuring that those who have benefited the most from property value appreciation contribute proportionately more.
Additionally, IPPR suggests increasing the non-resident buyer surcharge from 2% to 6% to curb profiteering from short-term housing market fluctuations.
Recent discussions have also revealed considerations by Chancellor Rachel Reeves to introduce new higher council tax bands that target owners of high-value properties, with potential measures including levies on property values or capital gains taxes on expensive property sales.
IPPR’s economist Aditi Sriram emphasized the urgency for reform, stating that the current council tax system is inequitable and outdated. The proposed changes aim to support working families, enhance local services, and establish a more just tax system.
Carsten Jung, IPPR’s associate director for economic policy, noted that these reforms represent a step towards more balanced property taxation, with millions of families likely to experience reduced tax burdens, particularly in less affluent regions. Further reforms could lead to more significant benefits, aligning with government efforts to alleviate the cost of living for citizens.
In response, a spokesperson from HM Treasury reiterated the government’s commitment to addressing economic challenges and focusing on priorities such as reducing waiting lists, national debt, and the overall cost of living through strategic budget planning.