Homeowners in much of England could save about £1,000 a year if council tax were scrapped and replaced with a new annual levy but those in London and parts of the South East would pay significantly more, new analysis suggests.
Research by estate agency Yopa modelled the potential impact of a “proportional property tax” framework, an idea under discussion in Whitehall as ministers look at ways of reforming both stamp duty and council tax.
At present, the average household in England pays £2,280 a year in council tax.
Using the proposed system, Yopa calculated that a household owning an average-priced property (£290,956) would pay about £1,280 a year, a saving of £1,000.
BIG REDUCTIONS
The biggest reductions would be concentrated in lower-value housing markets. In Nottingham, the typical household would be £1,816 a year better off. Savings of more than £1,700 were also projected in Gateshead, County Durham, Liverpool and Pendle.
However, homeowners in 35 local authorities – overwhelmingly in London, the South East and parts of the East of England – would pay more.
In Kensington and Chelsea, Yopa estimates the average bill would rise by £7,057 a year. In Westminster the increase would be £4,167, with notable rises also in the City of London, Hammersmith and Fulham, Wandsworth, Camden, Richmond upon Thames, Islington, Elmbridge, Windsor and Maidenhead, and Southwark.
LOCAL LEVY
The model assumes that properties valued below £500,000 would be subject to a local levy set by councils, based on a suggested average rate of 0.44% (or a minimum of £800). Properties worth more than £500,000 would pay an additional national levy, with rates of 0.54% on the portion between £500,000 and £1 million, and 0.81% above £1 million.
Verona Frankish, Chief Executive of Yopa, says: “So far, the debate around replacing stamp duty with an annual homeowner levy has focused largely on the potential benefits to homebuyers, but it also has implications for existing homeowners who could see a change to the annual amount of tax they currently pay.
“We could see a potential homeowner tax replace current outdated council tax thresholds and whilst details remain very thin on the ground, our analysis suggests many areas could see meaningful savings as a result.”
CLAW BACK
But she adds: “However, it’s important to consider that the proposed rates have yet to be confirmed and could vary depending on decisions taken by local councils.
“Given that the government stands to lose a considerable sum in stamp duty receipts, it may also look to claw some of this back by setting higher homeowner tax thresholds.
“Transparency on how the system is designed and implemented will be crucial so that homeowners can plan with confidence and so the market is currently waiting with bated breath for more details to emerge in the upcoming Autumn Budget.”
