Property Tax Disparity
Think tank reports £3.1bn London property tax gap amid calls for urgent reform.
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Key Points
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The gap is stark at local level: Burnley’s 2026–27 Band D council tax bill is £2,549 on an average home worth about £129,000, equivalent to 1.98% of its value. Westminster’s average home is worth about £844,000, but its £1,050 bill amounts to just 0.12% of the property’s value.
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The Resolution Foundation says most households could pay less under reform, but political resistance has focused on people who would lose out, including residents of gentrified parts of London.
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Outstanding council tax debt in England reached £7.4 billion, rising 11.3% in the year to 2025–26. The article also notes that missing a payment has historically made a household liable for a full year’s bill, though the government announced a change in April.
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The Big Issue describes council tax as regressive: because it has not kept pace with property values, it takes a higher share of income from low-income households than from better-off households.
A think tank has exposed a stark divide in how English property taxes are distributed. Resolution Foundation research shows London households are underpaying by £3.1 billion in council tax and stamp duty in 2024–25 because the tax system is frozen in 1991 valuations. Meanwhile, households across the rest of England — especially in the North East — are overpaying relative to their home values.
About 80% of London households benefit from this gap, while two-thirds of households elsewhere pay more than they should. The Negotiator reports that a £100,000 home could face nearly three times the tax rate of a £1 million property. The debate comes as councils face budget cuts and households struggle with rising bills and £7.4 billion in outstanding council tax debt.
A Tax System Frozen for Three Decades
England's council tax has not been revalued since 1991, creating massive inequities. Property Wire explains that Westminster's average home is worth about £844,000 but residents pay just £1,050 per year — only 0.12% of property value. By contrast, Burnley residents pay £2,549 on homes worth roughly £129,000, equivalent to 1.98% of value. One household pays 16 times more, tax-wise, simply by location.
The Big Issue describes the system as regressive. Because council tax has not kept pace with property appreciation, it takes a higher share of income from low-income households than wealthy ones. This means poor families in cheap areas subsidize tax breaks for rich families in expensive areas, all because property values changed unevenly over 33 years.
The Regional Pain: North East Bears the Heaviest Burden
While London thrives under the old system, regions outside the capital suffer. Standard.co.uk reports that more than two-thirds of households in the rest of England overpay. The North East is hit hardest: 85% of households are projected to overpay by 2030–31, with an average overpayment of £710 per year. Burnley and similar post-industrial towns face the worst gap.
The uneven distribution reflects decades of divergent property price growth. London and the South East saw explosive appreciation. The North saw stagnation. But the council tax bands stayed frozen, forcing northern households to shoulder tax bills that never adjusted downward, while southern households enjoyed a permanent discount.
Resolution Foundation Pushes for Overhaul While Tories Resist
Resolution Foundation is urging Chancellor John Healey to publish a reform plan. The think tank proposes three changes: a proportional property tax based on current values, council tax reform, and ending stamp duty on primary residences. These changes would modernize a system that treats identical homes wildly differently depending on location and purchase date.
Conservative shadow housing minister David Simmonds warns reform could backfire. He says proposals would penalize homeowners who improve their properties and remove single-person discounts. Mortgages Solutions reports political resistance centers on residents of gentrified London areas who would lose out — a powerful constituency that complicates reform despite the broader unfairness of the status quo.
Rising Debt and Pressure on Councils Intensify the Crisis
Council tax debt in England hit £7.4 billion in 2025–26, up 11.3% year-over-year. Standard.co.uk notes that historically, missing a payment made households liable for a full year's bill — a harsh penalty that pushed many deeper into debt. The government announced a change in April to soften this rule, but councils still face massive uncollected bills.
Councils are under severe budget pressure. Many lack funds for basic services. Rising council tax bills add to household strain, even as the system remains fundamentally broken. The Resolution Foundation argues reform could ease pressure on both councils and households — but only if politicians overcome resistance from London's comfortable majority.
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