“The irony is that council tax reform, designed to extract more revenue from property wealth, will likely reduce overall housing supply as marginal rental properties become economically unviable”
– Verona Frankish – Yopa
Council tax in the UK is undergoing significant discussion and potential change, while renters continue to navigate their responsibilities and options. Understanding both current policies and proposed reforms is essential for anyone paying council tax.
What is council tax?
Council tax is a levy that funds local authorities. It is devolved in Scotland and Wales, while Northern Ireland uses a domestic rates system instead of council tax.
In England and Scotland, council tax is calculated based on the value of a property in 1991, or, for properties built after that year, an estimated 1991 value. In Wales, the calculation is based on property values in 2003.
Critics argue that this method of valuing properties is complicated and creates unfair disparities because two households with homes of the same value can pay different amounts of council tax if they live in different council areas.
Yet despite widespread criticism of the current system, government proposals for reform have also faced scrutiny, with some arguing that the proposals could take funding from certain areas to increase it in others.
What are the reforms under discussion?
Economists and policymakers are proposing major changes to modernise the tax. One suggestion from economist John Muellbauer involves replacing the top two council tax bands with a 0.5% annual wealth tax on high-value properties. This change could affect around 1.1 million homes in England and Wales and might generate up to £9 billion in revenue. Muellbauer also proposes a deferral option for asset-rich, cash-poor pensioners to prevent financial strain.
The Treasury is also considering replacing stamp duty on homes sold for over £500,000 with a new property tax. This reform could reshape the council tax system and address distortions in the housing market.
Campaigners behind the Fairer Share initiative argue for a proportional property tax that replaces both council tax and stamp duty, linking tax liability directly to property value to create a fairer system for homeowners and renters alike.
Government actions include possible reforms to council tax billing, such as defaulting to 12-month payment plans and providing measures to protect households struggling to pay. The Fair Funding Review 2.0 has altered local authority funding, with some councils, particularly in rural areas, seeing increases, while others may need to rely more heavily on council tax rises to maintain services.
Pete Mugleston, Mortgage Advisor & Managing Director at Derby-based OnlineMortgageAdvisor, said, “Council tax in its current form is outdated and regressive, with bands based on property values from the early 1990s,” comments Pete Mugleston, managing director at Derby-based OnlineMortgageAdvisor. “If we want a fairer system, it needs to be linked to up-to-date property prices so the burden is progressive. That would mean those in higher-value homes pay more, easing pressure on renters and households at the lower end of the market.”
Political reactions have been mixed. More than 40 MPs and MSs have urged the government to reform council tax collection, recommending early intervention and support rather than aggressive enforcement. In addition, controversy has arisen over second home premiums, with some MPs, including energy secretary Ed Miliband, facing scrutiny for claiming increased council tax expenses on additional properties.
The Autumn Budget on November 26, 2025, is expected to provide further clarity on these proposals. However, Chancellor Rachel Reeves is also under pressure to address well-publicised fiscal shortfalls. Modernising the council tax system may have to wait until later.
Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial, said, “Labour could be really bold and progressive on this by distributing wealth. Not only could rates be significantly hiked on multi-million pound pads, but this could pay for a reduction in the lowest cost housing stock, freeing up money for the poorest in society. Of course, Reeves will see this as a revenue raiser, so, although larger properties will see an increase, this won’t be redistributed downwards- instead, maybe a freeze at best will be announced.”
The renters’ guide to council tax
Renters are typically responsible for council tax, though arrangements vary.
For example, tenants in private rentals usually pay unless the lease specifies otherwise. Social housing tenants often pay, but some councils provide discounts, and in houses of multiple occupation (HMOs), the landlord often covers the tax (but this may be included in the rent).
Council tax bands, ranging from A to H in England and Wales, determine the amount due based on the estimated property value in 1991. Higher bands result in higher bills.
Renters may qualify for discounts or exemptions:
Single person discount: 25% if living alone.
Student exemption: Full-time students are often exempt; part-time students may receive partial discounts.
Low-income support: Local councils may offer reductions for those on benefits.
Severe mental impairment: Qualifying conditions can provide exemptions.
Payments can be made through:
Direct debit, typically over 10 or 12 months.
Online payments via the council website.
In-person or phone payments at council offices or payment centres.
Non-payment can result in penalties, including reminder charges, legal action, or enforcement through bailiffs in extreme cases.
Tips for renters
Check your lease for council tax responsibilities.
Register promptly with your local council when moving in or out.
Apply for discounts early to ensure eligibility.
Keep documentation of student status, low income, or exemptions.
Spread payments over 12 months to manage costs.
What the industry is saying
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “It seems in their attempts to try to fill the financial black hole, the Government has little alternative but to increase taxes, with property the subject of intense speculation.
“Anomalies in the council tax system, particularly, have caught the Government’s eye as presenting an opportunity. Since the last revaluation of 1991, some areas have increased in value, whereas others have declined, and these changes have not been reflected in council tax liabilities.
“We hear of householders paying the same or less in expensive parts of London, such as Westminster, as in Blackpool, so what’s the solution? Ideally, a revaluation, but the cost and time of doing so present a problem. Extending the existing bands to take account of higher prices would be the simplest option, but those anomalies would remain. Otherwise, the tax could be removed altogether and replaced by an alternative property or mansion tax, but again, the time and cost of doing so would be prohibitive.
“Either way, the Government needs to bite the bullet sooner or later to take advantage of those gains, even if increases have to be phased in.”
Verona Frankish, CEO of Yopa, said, “We could see a potential homeowner tax replace the current outdated council tax thresholds, and whilst details remain very thin on the ground, our analysis suggests many areas could see meaningful savings as a result.”
“Entrepreneur and Landlord at London-based The Kushman Group, Kundan Bhaduri, says, “Council tax reform represents the biggest threat to property investment returns since the introduction of Section 24 mortgage interest restrictions.”
“Any move toward more frequent revaluations or additional bands targeting higher value properties will directly impact landlords through reduced rental yields and tenant affordability. Properties currently sitting comfortably in Band D could jump to Band F overnight, adding hundreds of pounds annually to tenant bills and making rentals unaffordable for middle-income families. This will create a downward pressure on rental demand in higher banded properties and upward pressure on cheaper stock, distorting the entire market.”
“The irony is that council tax reform, designed to extract more revenue from property wealth, will likely reduce overall housing supply as marginal rental properties become economically unviable. This creates precisely the opposite outcome politicians claim to want i.e. less housing supply and higher rents for everyone.”
Hiten Ganatra, managing director at Visionary Finance, added, “The government’s latest talk of modernising council tax may sound positive on the surface, smoother payments, updated discounts and clearer bills, but once again it feels like tinkering at the edges rather than addressing the real flaws in the system.”
“Council tax is still based on outdated property valuations from the early 1990s, and without tackling banding head-on, any reform risks being cosmetic. Worse still, shifting administrative processes and allowing staged payments without proper funding could simply add pressure on local authorities and, ultimately, increase costs for households.”
“What is more concerning is that behind the headline of ‘fairness’ sits the very real risk of a stealth tax. Much like the proposals to alter stamp duty thresholds, this latest move looks less like reform and more like a revenue-raising exercise. In markets like London and the South East, where prices are already high and mobility is limited, such measures could subdue transactions even further. That runs counter to any government’s goal of keeping the housing market moving – something that is vital to broader economic growth.
“We should be cautious. Reforms pitched as making the system fairer can too easily mask tax grabs or create fresh complexity. Unless the government is transparent about winners and losers, and ensures councils aren’t left scrambling to plug funding gaps, these changes risk eroding trust rather than building it. True reform means tackling the inequities built into the system, not just moving the furniture around.”
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