A recent report from the Institute for Public Policy Research (IPPR) suggests that increasing property taxes on wealthy individuals could generate £3.9 billion in revenue and lead to a reduction in council tax for the majority of households. The proposed reform aims to lower council tax bills by 3% for 80% of homes, creating a fairer system and funding essential public services.
The IPPR argues that the current council tax structure is outdated, allowing homeowners in affluent areas to pay less than those in less prosperous regions. Under the suggested changes, only the top 10% of properties would experience a tax hike.
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 an immediate 50% tax increase on bands F and G, and a 100% increase on band H properties valued over £1.5 million, aiming to raise the targeted £3.9 billion.
Of this revenue, approximately £1 billion would be allocated to reducing council tax bills for bands A to D, potentially saving households an average of £45. The IPPR asserts that these changes would create a fairer council tax system, ensuring that those benefiting most from property value appreciation contribute proportionally more.
Additionally, the IPPR proposes raising the non-resident buyer surcharge from 2% to 6% to discourage profiting from short-term housing market fluctuations. The Chancellor, Rachel Reeves, has hinted at introducing new higher council tax bands targeting owners of expensive properties, with other options including levies on property values or capital gains tax on luxury property sales.
IPPR economists Aditi Sriram and Carsten Jung emphasize the necessity of updating the council tax system to promote fairness and efficiency, supporting working families, enhancing local services, and establishing a more equitable tax framework. The proposed reforms could potentially alleviate financial burdens for millions of households, particularly in economically disadvantaged regions, with the potential for further improvements in the future. The HM Treasury spokesperson expressed that the upcoming Budget aims to address global economic challenges and prioritize British citizens’ needs, focusing on healthcare, national debt reduction, and cost of living concerns.