With council tax still tied to 1991 property values, fairness and modernisation are firmly back on the political agenda, ahead of the Autumn Budget, which has been confirmed for 26 November.
Ahead of the Budget, the Government has begun floating ideas for tax reform to gauge public reaction. One such idea is the long-awaited reform of the Council Tax system.
James Little, Associate in our Thames Valley valuation team, recently spoke to FT Adviser about the issue.
But before we consider what reform might look like, it’s important to understand how the system came into being.
In this article, James explores the pitfalls of the current system and what reform might look like.
From Poll Tax to Council Tax: How the system works
Council Tax was introduced in April 1993 replacing the short-lived Poll Tax (1989). The intention was to resolve the shortcomings of Poll Tax by creating a progressive system, where the level of tax paid would be proportional to a households wealth. To do this, properties were placed into value “bands” (A–H).
These bandings are assessed based on what the property would have sold for on 1 April 1991 -known as the antecedent valuation date.
Each home is valued as if it were empty, in a reasonable state of repair, and used only as a residence. Factors such as size, layout, character, and location are all assumed to be as they were at the antecedent valuation date.
Exceptions can occur where properties have been extended and sold or a material reduction in value has occurred due to the physical state of the locality.
Due to values being tied to the antecedent valuation date, the current system lacks the agility to reflect an everchanging property market. This has left value bands detached from reality.
This trend is particularly noticeable in commuter towns like Reading.
Developments such as the opening of the Elizabeth Line in 2022 and Station Hill scheme in 2024 have increased demand around the train station. As a result, lower banded homes are now achieving the same value as historically higher banded properties further from the town centre.
The result? Inequity. In some instances, lower-income households are now shouldering disproportionately high Council Tax bills, while others benefit from artificially low rates.
A difficult system to challenge
The appeals process is also fraught with challenges. Taxpayers are required to provide sales evidence from 1991 to contest their banding – an almost impossible task given that the Land Registry only began recording sales data from 1995.
Additional sources advised by the Valuation Tribunal include old newspapers, past tribunal decisions, or lists of property price changes. Unsurprisingly, few taxpayers find this a realistic way to build a strong case.
Why reform has stalled
Despite widespread recognition that the system is outdated, successive governments have avoided reform. Two key reasons explain their reluctance:
- Political sensitivity – The shadow of the Poll Tax lingers, and no government has wanted to risk a backlash.
- Limited incentive – A national revaluation would be costly, while offering little prospect of increased tax revenue.
As a result, reform has long been the “elephant in the room” of UK taxation policy.
Looking ahead: Is change finally coming?
Back in 2005, the government attempted to modernise the system using Automated Valuation Models (AVMs) – at the time, the largest mass appraisal in the world. Ultimately, the project was abandoned, but it demonstrated the potential for data-driven solutions.
Today, with vast amounts of Land Registry data available and advances in Artificial Intelligence, such approaches could provide a more efficient and accurate way forward.
While the skill of a professional surveyor remains unmatched, the use of technology could free up the Valuation Office Agency to focus on complex valuations and appeals.
Council Tax reform is no longer a question of if, but when. The current system is increasingly detached from the reality of the property market and does not act in the interest of public fairness.
The Government has an opportunity to modernise a tax regime that has been frozen in time for more than 30 years. Whether through revaluation, banding reform, or technology-driven solutions, the need for change is clear.
The challenge now is finding a balance between political risk, administrative cost, and the principle of fairness – ensuring that the burden of taxation truly reflects the society of today, not 1991.
