Council Tax ‘could double’ for these homeowners | Personal Finance | Finance
Homeowners could be hit by a wave of new council tax hikes – with some facing bills that double overnight – as Rachel Reeves considers ways to raise billions.
Doubling council tax for the owners of the most expensive properties is among a raft of options being examined to raise extra revenue without breaking Labour’s election pledges, it is claimed.
But experts warn this is just one of several measures under consideration that could push up bills for millions more families, hitting middle-income earners as well as the wealthy.
The average household already faces paying a record £1,740 in 2025-26, up 6% in a year.
Council tax, introduced in 1991 to replace the poll tax, has long been criticised as outdated and unfair because it is based on property values from more than three decades ago.
The Chancellor is reportedly considering doubling council tax for more than a million households in the top two bands – G and H – which would hit owners of larger and more valuable properties, particularly in London and the South East.
Such a move would raise around £4 billion, according to the Financial Times, with a typical band G bill soaring from £3,800 to £7,600, and band H homes facing rises from £4,560 to £9,120 a year. In Rutland, some bills could top £10,800.
But that is not the only option on the table. Treasury officials are also studying a series of more complex reforms which, taken together, could have an even greater impact on ordinary households.
One proposal would see the entire housing stock revalued for the first time since 1991, potentially dragging millions of families into higher bands.
House prices have risen 448% since the system was created, and one study found 55% of homes are now in the wrong band.
Families in London and the South East, where prices have more than doubled in the past 20 years, would be hit hardest.
Ms Reeves herself previously called for such a revaluation, writing in 2015 that council tax was “long overdue” for reform. But officials warn it would be administratively complex and politically explosive.
Another option would be to add new council tax bands for the most expensive homes.
Wales introduced a Band I for properties over £424,000 in 2003, raising bills by 17%. A similar move in England could bring in several billion pounds.
However, campaigners warn it would not fix the system’s underlying unfairness. Andrew Dixon, of Fairer Share, said: “Simply doubling or adding bands at the top end may raise a few billion in the short term, but they don’t fix the underlying unfairness or complexity.”
Currently, councils can only raise bills by up to 4.99% without a local referendum. But the Chancellor could remove or relax this cap, giving local authorities free rein to impose higher increases.
According to the Institute for Fiscal Studies, every extra 1 percentage point rise above the current limit could raise £500 million a year by the end of the decade.
Single adults currently get a 25% discount on their council tax – but this too could be scrapped.
The Institute for Fiscal Studies has called the discount “damaging to economic efficiency” and estimates removing it could raise £5.4 billion a year.
The move would add around £500 to the average annual bill for millions of single-occupancy households, many of them pensioners.
Critics warn such a measure would be deeply unpopular and politically risky.
A Treasury spokesman said last night: “We do not comment on speculation around changes to tax outside of fiscal events.”
However, experts say the scale of the fiscal shortfall – estimated at £26 billion – means Ms Reeves will be under pressure to act.
With revaluation long overdue and the Chancellor ruling out major increases to income or corporation tax, campaigners warn homeowners could soon find themselves in the firing line once again.
Fairer Share’s Andrew Dixon told the Telegraph: “The system is broken. It’s unfair, outdated, and punishes those on modest incomes. The danger is the Government just makes it worse.”
