A recent report suggests that implementing higher property taxes on wealthy individuals could generate £3.9 billion in revenue while reducing council tax burdens for the majority of households. The Institute for Public Policy Research (IPPR) argues that reforming property tax could lead to a 3% decrease in council tax for 80% of homes, creating a more equitable system and funding essential public services.

According to the IPPR, the current council tax system is outdated, resulting in discrepancies where homeowners in affluent areas pay less council tax than those in less prosperous regions. Under the proposed changes, only the top 10% of properties would experience an increase in council tax.

Council tax is currently determined based on a property’s valuation band, established in 1991 for England and 2003 for Wales. The IPPR recommends an immediate 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 today, aiming to raise £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 between £45 and £80 on average. The IPPR asserts that these reforms would promote fairness in the council tax system by ensuring that those benefiting most from property appreciation contribute proportionally more.

Additionally, the IPPR proposes raising the non-resident buyer surcharge from 2% to 6% to deter profiting from short-term housing market fluctuations. Recent discussions have indicated that Chancellor Rachel Reeves is contemplating introducing new higher council tax bands targeting owners of luxury properties, alongside potential measures such as a property value levy or capital gains tax on expensive property sales.

Aditi Sriram, an economist at IPPR and lead author of the report, emphasized the necessity of updating the council tax system to enhance fairness, efficiency, and support for local services. Carsten Jung, IPPR’s associate director for economic policy, highlighted the potential benefits for millions of households, particularly in less affluent areas, with further reforms expected to follow.

In response to these proposals, a spokesperson from HM Treasury acknowledged the Chancellor’s focus on addressing economic challenges and outlined priorities including reducing healthcare waiting lists, national debt, and the overall cost of living.