Council tax could be scrapped for all UK households under a dramatic overhaul being considered by Chancellor Rachel Reeves (Labour). The government has instructed officials to study how a new "proportional" property tax could replace the current system.
The local property tax could replace council tax within two parliaments. The proposed reform comes as property values have changed dramatically differently across regions since council tax was introduced.
Regional disparities drive reform
Values of different properties have increased more than twice as much in London compared to the North East since council tax was introduced, yet the tax has not changed to reflect that disparity. The Institute of Fiscal Studies highlighted this inequality in a 2020 paper on council tax reform.
The proposed new tax would apply to properties worth more than £500,000. Implementation would follow a two-stage approach, with stamp duty replacement first, then council tax reform.
Proposed alternatives emerge
A group called Fairer Share proposes scrapping council tax entirely, along with other property taxes, and switching to a 0.48 per cent flat tax on the current value of properties. The centre-right think-tank Onward published a report last August proposing a national and local "proportional property tax" based on property values.
Former Government adviser Tim Leunig wrote: "These proposals would make it easier and cheaper to move house, for a better job, or to be near family, as well as being fairer.
"It should not be the case that a terrace house in Burnley pays more than a mansion in Kensington - and it wouldn't be under these proposals."
Government focuses on growth
Implementation could take until beyond 2029. The reform represents part of a broader consideration of overhauling both stamp duty and council tax systems.
A Treasury spokesperson said: "As set out in the Plan for Change, the best way to strengthen public finances is by growing the economy - which is our focus. Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8bn and cut borrowing by £3.4bn
"We are committed to keeping taxes for working people as low as possible, which is why at last Autumn's Budget, we protected working people's payslips and kept our promise not to raise the basic, higher or additional rates of Income Tax, employee National Insurance, or VAT."
Sources used: "The Guardian", "Evening Standard", "Independent", "Birminghammail" Note: This article has been edited with the help of Artificial Intelligence.
