Council Tax Disparities Spark Reform Calls

Significant differences in council tax payments between affluent and less affluent parts of London are fuelling calls for reform. Residents in some of the wealthiest central London areas are paying less council tax than those in poorer boroughs, despite potentially owning properties of similar or even lesser value under the current banding system. Prime Minister Andy Burnham has publicly stated the need for 'big decisions' regarding the 'unfair' tax system.

Outdated Valuation System

A core issue contributing to these disparities is the basis of the current council tax bands. As reported by MyLondon, these bands are still determined by property valuations from April 1, 1991. This means that many properties, particularly in areas where property values have dramatically increased since that date, remain in lower tax bands than their current market worth would suggest. For instance, Westminster, with average property values exceeding £1 million, often sees residents in Band G paying £1,749.25 annually. In contrast, a similarly valued Band G property in Barking and Dagenham could incur a council tax bill of £3,664.16.

Alternative Revenue Streams for Wealthier Boroughs

Wealthier boroughs often supplement their income through sources other than council tax, reducing their reliance on this particular revenue stream. Westminster, for example, generates substantial income from business rates due to its numerous businesses and high footfall in its shopping districts. Mayor Sadiq Khan noted in January 2025 that Westminster collects more in business rates than the ten largest city councils outside London combined. Additionally, parking charges represent another significant income source; Westminster reportedly made £72 million from on-street parking between 2022 and 2023, far exceeding the £2.47 million generated by outer London borough Enfield in the same period.

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Proposals for a Proportional Property Tax

The Fairer Share Campaign is advocating for the replacement of the current system with a Proportional Property Tax. This proposed tax would apply a flat rate of 0.48 per cent to each property's current value, with the burden aimed at homeowners and landlords. Campaigners suggest this could benefit millions of renters and a majority of homeowners. However, MyLondon reports that such a change could lead to increased tax bills for homeowners in London, with those in properties valued at £600,000 potentially paying an extra £800 annually. The Prime Minister has acknowledged the complexity of making sweeping changes, stating that decisions must align with the 2024 Labour manifesto.

The debate over council tax fairness continues, with the outdated 1991 valuation system and the differing revenue-generating capacities of local authorities forming key points of contention. Future reforms, if enacted, could significantly alter property tax liabilities across the country, particularly impacting London homeowners.