Councils and Your Taxes

When it comes to councils and your taxes throughout England, the areas that most people would think have the highest council taxes on property actually do not. In a survey of tax rates by the Department for Communities and Local Government in 2015, some of the least expensive tax areas were in London including Kensington & Chelsea, Hammersmith & Fulham and Tower Hamlets. For a Band D home in Westminster the council tax was approximately £674. Those who live in the growing areas of Wandsworth saw their council tax at £683. In areas around Plymouth the average council tax for 2015/16 was £1600 to £1700. The Government has made money available to help local councils to freeze their tax rates which occurred in 241 out of 421 council districts.

Tax Bands

How did this all come about?

The Valuation Office Agency (VOA) is the government agency responsible for valuing properties for council tax purposes. It gives every home a tax band or rating so the council is able to collect the correct amount of tax.

In order to create the tax rates, properties were placed into a system of ‘bands’ of which there are eight from A to H. The bands are the sale value of a property which was created in April 1991 when the new tax system was established.

Band A includes properties worth up to £40,000 in 1991 and Band H includes assigned to properties worth more than £320,000.

The average property value range is that of Band D – properties valued in 1991 at a sale value of £68,001-£88,000.

Whilst Council tax bands have been widely criticized for using inaccurate property sale values and being expensive, owners can apply to the Valuation Office to have their tax rate adjusted.

Where to Buy

London home prices have driven many to live outside the city but what locations have the best 2015-2016 council tax rates for band D homes? According to the Department for Communities and Local Government, Weymouth and Portland are the most expensive at £1,756 followed by East Dorset at 1,720. Nottingham council taxes are at £1,709 and West Dorset at £1,680.

The least amount of council tax includes locations including the Isles of Scilly/Newham at a rate of £1,241, Lambeth tax rate of £1,239 followed by Southwark £1,207, Windsor & Maidenhead have a rate of £1,150 and the city of London with its council tax rate of £943.

According to the report for the years 2014-2015 and 2015-2016 the rate of increases have occurred in Copeland (£1,630) up 3%, Cornwall (£1,550) with an increase of 2,5% and Eden (£1,614) up 2.4%. In the same period decreases occurred for Windsor & Maidenhead (£1,150) saw a drop of 1.4%, a 1.1% decline for Hammersmith & Fulham (£1,023) and a 0.6% drop for Westminster at £674.

Council Tax Levels for 2016-2017

What can property owners expect in the Department for Communities and Local Government report for this next tax year?

The main points in the report are: ‘Band D council tax set by local authorities in England for 2016-17 will be £1,530, which is an increase of £46 or 3.1% on the 2015-16 figure of £1,484.’

The average area Band D council tax will be £1,306 in London (an increase of £8 when compared to 2015-16), £1,506 (+£55) in metropolitan areas, £1,572 (+£54) in unitary areas and £1,601 (+£54) in shire areas.

‘As for London tax rates the report states, London boroughs will have a lower increase in average Band D council tax compared to most other authorities with similar functions. This is due to over a third of London boroughs (13 out of 33) either freezing or reducing average Band D council tax (excluding adult social care and parish precepts).

‘Average Band D council tax (excluding adult social care and parish precepts) for the Greater London Authority will fall by 6.4% due mainly to the reduction of the Olympic precept. The precept was introduced in 2006-07 and has been set at £20 per Band D equivalent property for each year up to 2015-16. The precept is £8 in 2016-17.

Next Target: The Wealthy?

The difference in council tax rates has begun to draw fire from critics in other parts of Britain. In a report published earlier this year in the Liverpool Echo, the tax rates of wealthy London Westminster homeowners and those in Liverpool were compared. The report with data from showed : ‘…the owners of a seven- bedroom house on exclusive Smith Square in Westminster costing almost £20m – would pay £1,345.48 a year in council taxes – almost the same as a Band B property in Liverpool which this year is £1,256.65.

The Mayor of Liverpool, Joe Anderson, was quoted as saying the differences between the two cities council tax rates as “It’s obscene and outrageous that we have millionaires in Westminster paying less in council tax in contributing to their city than we have here.”

This issue has also been raised earlier this year by First Minister Nicola Sturgeon of Scotland who pledged an overhaul on the council band tax ratio system. The Herald Scotland quoted one source as stating, “The ratios will go out of the window. We want the new system to be much fairer.”

The source said that a new scheme would include, ‘…protections for people living in large houses but on low incomes, the so-called “asset-rich, cash- poor”.  Thus bringing to the forefront the ‘SNP’s long-cherished goal of replacing council tax with a local incomes tax.’

Local councils can expect projected funding cuts of £350million to £500million next year. Some Councils had planned on not extending the council tax freeze to raise money needed for services. The Herald report included comments from Finance Minister John Swinney‘…the prospect of higher council tax bills for people living in larger houses comes as Mr. Swinney prepares to outline how he would use Holyrood’s new income tax powers. He is expected to announce plans to raise the top rate of income tax, paid by those earning over £150,000, from 45p to 50p.’

As rates are compared between cities and councils like Liverpool and London continue so will the calls for scrapping the system for a new one. Mayor Anderson has said, “If there was ever an argument to review the funding and stop it from disadvantaging cities like Liverpool you could not get a clearer example.”

By Kevin Murphy:

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