“Council tax is an outdated and regressive levy on households that should be scrapped in favour of a progressive levy on property, according to a report by the Resolution Foundation.
The thinktank said council tax had become almost flat-rated in some areas to leave it resembling the much maligned poll tax of the early 1990s.
Someone living in a property worth £100,000 pays around five times as much council tax relative to property value as someone living in a property worth £1m. This is exactly the kind of result that opponents of the poll tax wanted to avoid and in stark contrast to income tax, which increases with incomes in a progressive way so higher earners pay a higher average tax rate,” she said.
There are eight council tax bands that determine annual charges. All the bands are based on 1991 property prices following the failure of successive governments to sanction revaluations.
The highest band (H) is for homes valued at £320,000 and above, despite the average London houseprice now being more than £480,000. Purbeck district council in Dorset will charge band H homes £3,747 from April while Wandsworth council in London, which hosts some of the most valuable homes in the UK, will charge £1,433.
The foundation said ministers should consider replicating the 2017 reforms implemented in Scotland across England and Wales, which involved increasing council tax rates in the top four bands and generated a little over £1bn.
An alternative reform would be a “mansion tax” surcharge of 1% on the value of properties worth more than £2m and 2% on the value of properties above £3m, which would also generate just over £1bn.
A broader overhaul could involve a switch to a 0.5% charge on all properties that would result in a £100,000 home in Newcastle being charged £500 a year and a similar sized £1m home in London charged £5,000 – a £3,000 increase on current charges. …”