Chancellor Rachel Reeves is poised to announce significant reforms to council tax in her Autumn Budget on November 26, potentially affecting millions of homeowners across England.
Proposed Council Tax Increases
The Labour government is considering several measures to increase revenue from property taxes. One reported plan involves doubling council tax on properties in England's top two bands (G and H). Analysis from the Institute for Fiscal Studies suggests this could mean an additional £3,800 annually for band G properties and £4,560 for band H homes in an average local authority.
Another proposal involves revaluing homes in the three highest tiers (F, G and H) and applying a surcharge to the top 300,000 properties by value across these bands. Tax Policy Associates estimates that more than three-quarters of the expected £4 billion revenue would come from band G households due to their greater numbers.
The 'Mansion Tax' Controversy
The Telegraph has reported that the Treasury is working on a £600 million 'mansion tax' that would represent a fundamental shift in property taxation. The plan would involve revaluing 2.4 million of the most valuable properties across bands F, G and H.
David Fell, lead analyst at estate agency Hamptons, described this approach as 'more akin to a wealth tax'. He noted the potential unfairness for recent buyers: 'While homes bought a generation or more ago have seen above-inflation increases in value, those bought more recently may be worth less than what their owners paid.'
Political Reactions and Concerns
The proposed changes have sparked concern among some Labour MPs about the impact on constituents, particularly 'asset-rich, cash-poor' households who might struggle with higher bills despite property values.
Chancellor Reeves has defended the approach, arguing that those with the 'broadest shoulders' should bear their fair share of additional taxes. However, Shadow Housing Secretary Sir James Cleverly has warned that Labour's changes could lead to council tax increases of 10% or more annually in some areas, with no upper limit on what councils can request.
The Housing Department has acknowledged that 'some local authorities may be in a challenging financial position' as a result of the changes, while promising to consider local requests for council tax flexibility where authorities face significant difficulty.
Hannah Peaker, deputy chief executive of the New Economics Foundation, supports rethinking property tax but cautions against a 'haphazard' approach. She advocates for wholesale revaluation and a fairer tax design to address systemic inequalities.
