Westminster in Central London – home to the famous Big Ben, Houses of Parliament, Buckingham Palace and some of the most exclusive and expensive homes in the world where the average property price is more than £1m. However, live here and you can enjoy the lowest Council Tax rates in the entire UK.
Council Tax is paid by every household in the UK and currently remains the only tax which if you don’t pay you can be put into jail. It is collected by local councils to help pay for police, fire, schools, caring for old people, roadways, libraries and other local services. Unlike income tax, council tax has nothing to do with how much you earn, it is based on the value of the property you live in – the higher the value of your property, the more you pay – which seems fair right? Well, the UK’s outdated council tax system means the richest people in Britain are paying half as much tax as the poorest people in Britain.
You see, when assessing how much council tax should be paid, each property is placed into one of eight bands (A-H) based on its value, A being the lowest and H being the highest. However, the assessment is based on the property value back in 1993. This means that even new build properties are valued on what they would have likely achieved back in 1993 – crazy right. Furthermore since 1993, most properties in the UK have probably doubled in value, and there has been variation in house prices rises and falls across the UK -for example: in London, house prices have risen in some cases five-fold; whereas other areas have only increased slightly; yet the UK government has not updated the value of the bands to reflect this variation.
More surprising, is that there is no fixed amount charged for each band across England and Wales. Each of the 353 or so local councils independently set the amount for each band they will charge for council tax, this means there is huge variation in the amount people pay in council tax across the country. For example, if you live in Westminster, which is controlled by Westminster City Council, you pay between just £463.66 and the maximum at just £1,421 a year – which is currently the lowest council tax rates in the country. Meanwhile, if you live in Cornwall on the South East coast of the UK, although famous for its Cornish pasties, it was recently announced as second-poorest region in northern Europe and where a quarter of children live in poverty; you will pay more than 2.5 times for each band compared with Westminster at between £1,181.53 and the highest band at a crazy £3,544.58 a year.
So why doesn’t the government just change the system? Well I like to think it’s because they’re too lazy, but it might be more complex than that. Council Tax has its origins way back to the 1600’s under the Poor Law Act of 1601; and in 1924 a new law was passed to charge residential properties based on how much they would rent for, with revaluations set for every five years. The same system is still used today to tax commercial properties subject to business rates. In reality; revaluations were often delayed way passed 5 years and system was viewed as an unfair and complicated tax system.
By 1990, the then Prime Minister, Margaret Thatcher, introduced an entirely new system called the Community Charge - a fixed tax per head paid by everyone in the country. This now meant a single person living alone would pay far less tax than a large family living next door in a similar sized property. Hailed to be a fairer approach to tax, the Community Charge, or as it was nicknamed the Poll Tax, instead triggered civil disobedience and riots and a rebellion in the government.
People began rioting on the streets, taking to their thousands in London’s Trafalgar Square. People complained it was unfair, expensive (with taxes up to £300 per person each year), some even simply refused to pay - coining the phrase “Can’t Pay, Won’t Pay”, the government eventually ended up writing off almost £5 billion of the Poll Tax on the 4 million people who refused to pay. The Poll Tax was ultimately a disaster and resulted in the resignation of Margaret Thatcher’s 11 years as Prime Minister. In 1993, the new Prime Minister Sir John Major introduced a new system – Council Tax, a tax based on property values at that time and which has not changed since. With the varied history of Council Tax, will the government ever risk changing it again? Only time will tell. But one thing can be certain, when you’re looking at where to buy a property in the UK, it is worth checking out how much that local council charges for each band as you might ended up in a high council tax area.