# Council Tax Is a Regressive Disaster—And Everyone's Too Scared to Fix It

> Council tax is based on 1991 property values, charges the poorest proportionally more than the rich, and raises £40 billion annually through a system everyone agrees is broken. Reform is obvious and overdue—but politically toxic, so nothing changes.

*Section: Opinion — By Naomi Clarke (Opinion Editor) — Published October 28, 2025 — 10 min read*

Canonical URL: https://dailyjunction.org/opinion/council-tax-regressive-disaster
Tags: council tax, local government, taxation, inequality, social policy, opinion

## Key takeaways

- Council tax is based on property values from 1991, meaning a £100,000 home and a £1 million home in the same band pay the same amount
- The poorest households pay 5-6% of income in council tax while the richest pay under 2%, making it highly regressive
- Band H (top band) pays only 3 times more than Band A despite properties worth 10-20 times more
- A revaluation would shift £3-4 billion from poorer to wealthier areas, making it politically toxic despite being fairer
- Alternative systems like land value tax or proportional property tax exist but require political courage to implement

Council tax is one of the most regressive, unfair, and indefensible taxes in the British system. It is based on property values from 1991—over 30 years ago—meaning a £100,000 terraced house and a £1 million detached house in the same band pay exactly the same amount. It charges the poorest households 5-6% of their income while the richest pay under 2%. The top band pays only three times more than the bottom band, despite properties worth ten or twenty times more. And it raises £40 billion per year, making it the third-largest tax after income tax and VAT.

Everyone agrees it is broken. The Institute for Fiscal Studies has called it "regressive and outdated." The Resolution Foundation has shown it entrenches regional inequality. Even the government's own reviews have concluded it needs reform. But nothing changes, because reform would create winners and losers, and the losers—wealthy homeowners in high-value areas—vote.

The result is a system that punishes the poor, rewards the rich, and is so obviously unfair that defending it requires wilful blindness. Yet it persists, year after year, because political cowardice trumps basic fairness.

## How council tax works: a system frozen in time

Council tax was introduced in 1993 to replace the poll tax, which had been so unpopular it brought down Margaret Thatcher. The new system was supposed to be fairer: instead of a flat charge per person, it would be based on property values, with eight bands (A to H) and higher bands paying more.

Properties were valued in 1991 and placed in bands based on their estimated value at that time. In England, the bands were:

- **Band A**: up to £40,000
- **Band B**: £40,001 to £52,000
- **Band C**: £52,001 to £68,000
- **Band D**: £68,001 to £88,000
- **Band E**: £88,001 to £120,000
- **Band F**: £120,001 to £160,000
- **Band G**: £160,001 to £320,000
- **Band H**: over £320,000

The amount you pay depends on your band and your local council's rate. A Band D property pays the baseline amount. Band A pays two-thirds of Band D. Band H pays twice Band D. So if Band D is £2,000 per year, Band A pays £1,333 and Band H pays £4,000.

The system has not been updated since. Properties are still in the bands they were assigned in 1991, based on 1991 values. A house worth £60,000 in 1991 is in Band C. If it is now worth £600,000, it is still in Band C. A house worth £350,000 in 1991 is in Band H. If it is now worth £5 million, it is still in Band H and pays the same as a £350,000 house.

This is not a tax system. It is a historical accident frozen in time.

## The regressivity problem: the poor pay proportionally more

Council tax is regressive, meaning the poor pay a higher proportion of their income than the rich. This is the opposite of income tax, which is progressive (higher earners pay a higher percentage).

According to the Institute for Fiscal Studies, households in the poorest 10% pay around 5-6% of their income in council tax. Households in the richest 10% pay under 2%. This is because:

1. **Council tax is a flat charge per property, not a percentage of income or wealth.** A low-income household in a Band A property pays £1,333. A high-income household in a Band H property pays £4,000. The rich household pays three times more, but it might earn ten or twenty times more.

2. **The bands are capped at the top.** Band H covers everything over £320,000 (in 1991 values). A £350,000 house and a £10 million mansion pay the same council tax. There is no Band I, J, or K for higher-value properties.

3. **Property values have diverged massively since 1991.** In London and the South East, average house prices have risen 400-500%. In parts of the North and Midlands, they have risen 100-150%. But the bands have not changed, so the tax burden has shifted from high-value areas to low-value areas.

The result is a system where a nurse in a Band A terrace in Middlesbrough pays 6% of her income in council tax, while a banker in a Band H mansion in Kensington pays 1%. This is not a progressive tax. It is a regressive poll tax with extra steps.

## The valuation freeze: why 1991?

The obvious solution is to revalue properties based on current values. This would shift some properties into higher bands and some into lower bands, making the system fairer and raising more revenue from high-value areas.

But this has not happened, because revaluation is politically toxic. The last revaluation in England was in 1991. Wales revalued in 2005, and the political backlash was so severe that no government has dared try it since.

Why? Because revaluation creates millions of individual winners and losers. In areas where property values have risen faster than the national average—London, the South East, university cities—many households would move into higher bands and pay more. In areas where values have risen more slowly—parts of the North, Midlands, and Wales—households would pay less.

The Institute for Fiscal Studies estimates that a revaluation would shift £3-4 billion per year from poorer areas to wealthier areas. This is fairer—it means the rich pay more and the poor pay less—but it is politically disastrous. The people who would pay more are homeowners in marginal constituencies who vote. The people who would pay less are renters and low-income households who vote less reliably.

So instead, we have a system frozen in 1991, based on property values that bear no relation to reality, that everyone agrees is broken but no one will fix.

## The banding problem: the rich pay far too little

Even if we revalued properties, the banding system would still be unfair, because the top band is capped. Band H covers everything over £320,000 in 1991 values—roughly £750,000 in today's money. A £750,000 house and a £20 million mansion pay the same council tax.

This is indefensible. In a fair system, the £20 million mansion would pay 25 times more than the £750,000 house. In the current system, it pays the same.

The solution is either to add more bands at the top—Band I for £1-2 million, Band J for £2-5 million, Band K for over £5 million—or to scrap bands entirely and charge a percentage of property value. The latter is simpler and fairer, but it is also more politically toxic, because it makes the redistribution explicit.

The Resolution Foundation has proposed a proportional property tax, where everyone pays 0.5% of their home's current value per year. A £200,000 home would pay £1,000. A £2 million home would pay £10,000. This would be progressive, transparent, and fair. It would also shift billions from the rich to the poor, which is why it will never happen.

## The regional inequality problem: London subsidises the North

Because council tax is based on 1991 values, and property values have diverged massively since then, the tax burden has shifted from high-value areas to low-value areas. London and the South East, where property values have risen fastest, pay proportionally less than they should. The North and Midlands, where values have risen more slowly, pay proportionally more.

This is the opposite of what a fair system would do. London is the richest region in the UK. It should pay more in tax, not less. But because council tax is frozen in 1991, it pays less.

The Institute for Fiscal Studies estimates that if council tax were based on current property values, London would pay £2 billion more per year and the North would pay £1 billion less. This would reduce regional inequality and fund better services in poorer areas. But it would also provoke a backlash from London homeowners, so it does not happen.

The result is a system that entrenches regional inequality, subsidising the richest region at the expense of the poorest.

## The alternatives: land value tax and proportional property tax

There are two main alternatives to council tax, both used successfully in other countries:

**1. Proportional property tax**: Everyone pays a fixed percentage of their home's current value—say 0.5% per year. This is simple, transparent, and progressive. It is used in parts of the US and Canada. The barrier is political: it would require annual valuations and would make the redistribution from rich to poor explicit.

**2. Land value tax**: Instead of taxing the property (house + land), you tax only the land, based on its unimproved value. This encourages development (because building on land does not increase the tax) and discourages land hoarding. It is used in Denmark, Estonia, and parts of Australia. The barrier is technical: valuing land separately from buildings is complex, and the transition would create winners and losers.

Both systems are fairer than council tax. Both are used successfully elsewhere. The question is whether we have the political courage to adopt them.

## The political economy of inaction

Why does council tax persist, despite being obviously unfair? Because reform is politically toxic. Revaluation would create millions of losers—homeowners in high-value areas who would pay more—and they vote. Adding more bands at the top would be seen as a "mansion tax" and would provoke tabloid outrage. Switching to a proportional property tax would be even worse, because it would make the redistribution explicit.

The result is a conspiracy of silence. Both major parties know council tax is broken. Both have commissioned reviews that recommend reform. But neither will act, because the electoral cost is too high.

Labour flirted with a "mansion tax" in 2015 and was savaged by the Tories and the tabloids. The Lib Dems proposed a land value tax in 2010 and were ignored. The Conservatives have done nothing, because their voters are disproportionately homeowners in high-value areas who benefit from the current system.

The political incentive is clear: do nothing, blame the other side, and hope the problem does not explode on your watch.

## What reform would look like

Fixing council tax is not technically difficult. The options are well understood:

**Short-term**: Revalue properties based on current values and add more bands at the top (Bands I, J, K) to capture high-value properties. This would be fairer and raise more revenue from the rich.

**Medium-term**: Introduce a proportional property tax, where everyone pays a fixed percentage of their home's current value. This would be simple, transparent, and progressive.

**Long-term**: Shift to a land value tax, taxing the unimproved value of land rather than property. This would encourage development, discourage land hoarding, and be highly progressive.

All three options are fairer than the current system. All are used successfully in other countries. The barrier is not technical. It is political—the refusal to confront wealthy homeowners and tell them they need to pay more.

## The bottom line

Council tax is a regressive disaster. It is based on property values from 1991, charges the poorest proportionally more than the rich, and raises £40 billion annually through a system everyone agrees is broken. The top band pays only three times more than the bottom band, despite properties worth ten or twenty times more. A revaluation would shift billions from poorer to wealthier areas, making it fairer but politically toxic.

Alternative systems—proportional property tax, land value tax—exist and work well in other countries. The barrier is not technical or economic. It is political cowardice. Reform would create winners and losers, and the losers vote.

So instead, we have a system frozen in time, based on values from over 30 years ago, that punishes the poor and rewards the rich. Everyone knows it is broken. No one will fix it. And the injustice continues, year after year, because political survival trumps basic fairness.

## Frequently asked questions

### Why hasn't council tax been revalued since 1991?

Because revaluation would create millions of individual winners and losers, and the losers—homeowners in areas where property values have risen fastest, particularly London and the South East—vote. The last revaluation in Wales in 2005 caused a political backlash that terrified every government since. The result is a system frozen in time, based on property values from over 30 years ago, that everyone agrees is broken but no one will fix.

### Couldn't we just add more bands at the top to make it fairer?

We could, and it would help, but it wouldn't fix the fundamental problem: council tax is a flat charge per property, not a percentage of value. Even with more bands, someone in a £10 million mansion would pay only a few times more than someone in a £150,000 flat. A proportional property tax—where you pay a percentage of your home's value—would be far fairer, but it would require political courage to implement and would face fierce opposition from wealthy homeowners.

### What would a fair local taxation system look like?

The best option is a proportional property tax, where everyone pays the same percentage of their home's current value—say 0.5% per year. This would be progressive (the rich pay more), transparent (you know what you owe based on your home's value), and fair (similar homes pay similar amounts). Alternatively, a land value tax would tax the unimproved value of land, encouraging development and discouraging land hoarding. Both systems work well in other countries. The barrier is political, not technical.

## Sources

- [Institute for Fiscal Studies — Council tax analysis and reform options](https://ifs.org.uk/)
- [Resolution Foundation — Local taxation and inequality](https://www.resolutionfoundation.org/)
- [Local Government Association — Council funding data](https://www.local.gov.uk/)
- [The Fairer Share campaign — Council tax reform advocacy](https://www.fairershare.org.uk/)

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Daily Junction — https://dailyjunction.org/opinion/council-tax-regressive-disaster