Council tax is broken. Here’s what we should do about it.

Council Tax is one of the most regressive, dysfunctional and confused elements of the UK’s tax regime. If you feel like you’re paying through the nose for services that are in decline or have totally disappeared, that’s because council tax isn’t working. It’s handing the biggest bills to people who can’t afford them, and leaving councils without the budget to deliver the services they need to. Right now, a family living in a £400,000 home in Blackpool, faces a higher bill than a Billionaire living in a £10 million mansion in Mayfair, but is way more likely to experience stretched and struggling services with significantly less money to get by on. It’s no surprise that more than 4.4 million people in the UK are behind on their Council Tax, with arrears now totalling £8.3 billion.

Here’s how decades of quick fixes, bolt‑ons, stitch‑ups and political avoidance have left us with a not‑fit‑for‑purpose Frankenstein tax — and how we can finally replace it with something fairer and more functional. 

Council Tax: A Pot-Holed History

Council Tax was born out of crisis, not design. After the Poll Tax collapsed under massive public mobilisation and outcry in 1991, the Government rushed through a replacement that could be implemented quickly and quietly. The result, introduced in 1993 and based on 1991 property valuations, was meant to be temporary. Three decades later, we’re still stuck with it.

That’s right, this is a system largely designed according to 1991 open-market values, or 2003 in the case of Wales. So, someone has to estimate what a 2025 new build in Stratford, next to the Olympic Park, would have been worth in 1991: when the house, and the neighbourhood didn’t even exist. This ridiculous system persists due to political inertia and cowardice, with successive governments have layered on tweaks rather than tackling the core problems.

In the 2000s, Labour tried to patch the system with discounts and exemptions for single people, students and disabled residents. Wales revalued homes in 2005, based on open-market value in 2003 despite regular protestations that it’s too difficult to do. Plans to do the same in England were subsequently abandoned. In the 2010s, the Conservatives slashed central government funding for councils, making them more dependent on Council Tax, while also capping annual increases and refusing to revalue properties.

The UK’s system for funding local services now works to continuously embed and deepen regional and wealth inequalities. Residents of the country’s most affluent areas have the biggest local government budgets, the lowest resident tax bills, and the lowest urgent demands on local services. Yet the poorest areas have tiny budgets, massive need, and rates local residents can’t afford, which keep growing. This is why we have to put up with libraries shutting down, bins going uncollected, and pot-holes that don’t get fixed.

At the last Budget, the Chancellor admitted that Council Tax is a “longstanding source of wealth inequality.” But instead of a full overhaul, she introduced more tweaks: a bolt-on that shifts £600m in council collections to the poorest boroughs, and a so‑called “Mansion Tax” that adds a surcharge to properties over £2 million, with a cap on the maximum charge meaning it barely touches the ultra‑rich (someone who owns a £20 million home would pay just £7,500).

Three decades of patches, freezes and political fear have left Council Tax a confused, regressive relic — one that no longer matches the country it’s supposed to serve.

So how do we fix it?

Council Tax is held together by political duct tape. Fixing it means replacing it— with a system that reflects the country we live in now, not the early 90s. We’re supportive of an idea that’s been proposed: a Proportional Property Tax (PPT). This is a simple, progressive, modern, and predictable system where people pay a fixed percentage of the value of any properties they own. Those with the cheapest homes pay the least. Those with high‑value properties contribute their fair share. And landlords, not tenants, pick up the bill for rented homes. Wonder how much you’d save? Try this calculator.

This would allow bills to be recalculated easily every year and give councils the stable funding they need to run the services communities rely on. But a PPT is only one part of the picture. A fairer system also means one that recognises that houses should be homes for living first and foremost, not piggy banks, investments or playgrounds for the super–rich. That’s why we should abolish stamp duty for those purchasing a home to live in, and increase rates on second homes, speculative purchases and holiday lets— so wealthy buyers stop pricing out local people. Wales is already moving in this direction, using its Land Transaction Tax to push back against the hollowing‑out of communities.

A reformed property tax must also help rebalance the country. With a PPT, revenue would be split between councils and central government, allowing local areas to benefit from growth while ensuring national redistribution to places with higher needs or lower property values. But crucially we should also look at restoring local-spending support from the central government to allow a fairer distribution of resources. That means increasing revenues collected from national taxes, by asking those who can afford it to pay more: with wealth taxes and taxes on corporations, and targeting the proceeds at the communities who have been left behind for decades.

We should also reform business rates so they stop punishing small high‑street shops, the very businesses that keep local economies alive, while allowing massive multinationals to pay proportionally less. One way of doing this as part of wider changes to property and land taxes to make the system fairer, is a Vacant Land Tax. It is already being explored in Wales and Scotland, and would finally end the practice of speculators hoarding land and waiting for values to rise. Forcing owners to build, develop or sell would unlock homes, and boost growth.

What's next?

As you can see, we’re not short of ideas. We know how to make property tax fairer, to stop hoarding and rebalance the system so the richest pay the most. So local services are properly funded and left‑behind communities can get the cash they deserve. What’s missing is political courage. Big reforms are complicated. They need to be done properly. That’s why the most important step the Government can take now is to commission a full, independent review of property taxes — to get the technicalities right, build the evidence base, and prepare the ground for the overhaul this country has needed for more than thirty years.

Our friends at Fairer Share currently have a Parliamentary petition open for signatures, calling for an independent review of Council Tax. It closes on 23 July, and while it’s already passed the threshold for a government response, it’s still short of the numbers to try and force a Parliamentary debate. If we want change, this is the moment to push. Sign the petition now.