£150,000 home that pays more tax than a £77m mega-mansion
That’s just one of the injustices in the council tax postcode lottery. But reform is fraught with perils
ONe is a £77.5 million eightbedroom luxury mansion in one of London’s most exclusive postcodes. The other is a modest family home in County Durham on the market for £150,000. Yet the owners of the three-bedroom semidetached home in the village of Lanchester have to pay £1,794 in council tax every year. Whereas the millionaires whose grand Belgravia property is worth 500 times more have to pay just £1,560.
Campaigners say this incongruity is just one example of why our council tax system is long overdue an overhaul. Next month marks 30 years since the birth of the 1991 property valuations that dictate how much council tax we pay.
The pandemic has also pushed more than one million of us into council tax arrears. But local authorities have been handed the power to push up bills by as much as 5 pc from next month. Backbench Tory MPs are also supporting calls to reform the tax, which they say is needed to ease the burden in poorer regions and help ‘level up’ Britain. Money Mail today reveals:
ENGLAND’S richest areas have the lowest council tax burden. Homeowners in wealthy Westminster pay just 0.06 pc of their property’s value.
MEANWHILE, poorer areas face a higher rate. Residents in the constituency of easington in County Durham face bills worth 1.41 pc of their home’s value.
ONE London street has residents on one side paying £1,500 a year, while those on the other pay just £824.
AROUND £3 billion is now owed in council tax arrears, Citizens Advice fears. The charity says more than half of these households weren’t in debt before the pandemic.
THE aggressive way in which councils chase the debt mean court and bailiff fees can turn a £167 debt into more than £2,000 in just two months.
Council tax replaced Margaret Thatcher’s unpopular poll tax in 1993. In england, homes were placed in bands from A to H depending on their estimated market valuation in April 1991.
A home worth £40,000 or less was put in band A, and homes worth more than £320,000 in band H. Rates in Scotland rely on valuations from 1991 too. In Wales, new bands were drawn up on valuations in April 2003. The money collected goes towards local services including road maintenance, leisure facilities, waste disposal and the police.
The latest figures from the Valuation Office Agency show 12,400 council tax bills were reduced last year after more than 42,000 appeals against band rates from homeowners.
UNFAIR BURDEN ON WORST-OFF
CRITICS say how much council tax you pay has very little bearing on how wealthy you are or how much your property is worth.
Campaign group Fairer Share, which is calling for council tax and stamp duty to be scrapped and replaced with a proportional property tax, says the poor have an unfair burden.
The group says homeowners in some of the most deprived areas in the country are paying more than some of the richest people in the world. Those who live inside the boundaries of the wealthy Westminster local authority have their bills capped at £1,560 a year. Fairer Share’s research reveals that the owners of a £3 million mansion in Wandsworth, SouthWest London, pay £1,647 a year in council tax. Whereas residents in 75 homes in one street in Hartlepool, County Durham, which are collectively worth £3 million, have to shell out £106,795 every year.
Fairer Share founder Andrew Dixon says: ‘The burden of council tax is getting worse and worse. Council tax is a wealth tax for those in the poorer parts of the country. For the rich, it is a service charge to remove the bins. The worst thing about this tax is it is based on an arbitrary property value that is 30 years out of date.’
The campaign group wants to see properties taxed annually at 0.48 pc of the value — with prices updated every year.
The campaign has the backing of backbench Tory MPs who want to see Chancellor Rishi Sunak announce a consultation on council tax reform. John Stevenson, Tory MP for Carlisle, says: ‘There is huge disparity between areas. You often find lower value properties have higher rates. I think we are long overdue a reform.’
Aaron Bell, Conservative MP for Newcastle-under-Lyme, says a proportional property tax would be ‘more modern and much fairer’.
‘RATCHETING UP’ REGIONAL RATES
RESEARCH from lobby group the TaxPayers’ Alliance reveals that Mendip district council in Somerset increased its rates by 8.3 pc last year — five times the rate of inflation. Yet residents of Basildon in essex, Corby in Northamptonshire and Chorley in Lancashire all had their bills frozen. Northumberland county council residents had the highest council tax bill in england at £1,848.39 a year for a band D property — compared to the lowest in Westminster at £449.92.
John O’Connell, chief executive of the TaxPayers’ Alliance, says: ‘Taxpayers are being battered by inflation-busting rate rises, with millions of pounds being collected over and above what would be normally expected. While councils have been quick to reference social care pressures to explain rising bills, many authorities with no social care responsibilities are still ratcheting up rates.’
Council tax rises are implemented by individual local authorities but the Government sets the parameters. Currently, councils can usually raise bills by no more than 2 pc every year — unless a proposal for a higher increase gets the backing of residents in a referendum.
Yet the Government has allowed councils responsible for adult social care to hike bills to cover the rising cost.
It means the 152 authorities that provide care can increase council tax by an extra 3 pc over the next two years.
The Local Government Association says strained councils were now facing a tough choice over hiking bills to protect services when any increases could be a ‘ significant burden’ to some households hit hard by the virus crisis.
WOULD REFORM COST YOU MORE?
A PROPORTIONAL property tax would likely mean that many homeowners in London and the
Home Counties would have more than £ 1,000 added to their annual bill.
Under fairer share’s proposals to scrap council tax and stamp duty and instead use a 0.48 pc levy on the property value, those living in homes worth less than £500,000 would likely see their bills fall.
the group says tax increases would be capped so no household had to pay more than £1,200 on top of what they pay now.
it means a £4 million home in Beaconsfield, Buckinghamshire, currently paying £3,594 a year would pay £4,794.
A resident of a £1.25 million house in Boris Johnson’s Uxbridge and south ruislip constituency in West London would face a rise from £3,206 to £4,406. And the owners of a £729,000 home in Aldershot, Hampshire, would pay £2,976 — a £1,200 increase on the current annual bill of £1,776.
fairer share also says asset- rich and income- poor residents could opt to defer payments until they sold their houses.