why is council tax calculated by property value rather than income?

[AgentDaleCooper]

been wondering about why council tax bands are determined by your property value rather than your income...also, why it's based on what your property was worth in 1991 (i think?) rather than something more up-to-date? seems odd to me, and rather arbitrary. there must be a good reason though?

[Scouse Hibee]

Because we already pay income tax.

[Hiber-nation]

Because we already pay income tax.

The SNP wanted to bring in a Local Income Tax a while back but changed their minds when they had a proper look at it. They reviewed it a couple of years ago but all that's seemed to happen is that people in the higher bands are paying more. Both the Scottish and UK Governments are too scared to change it as it's probably been the least criticised local tax system and any radical change might be hugely unpopular.

To have a revaluation of house values would probably take years and cost money that the Scottish Government will probably say they can't afford. The end result would be a massive change in a lot of people's bills as well. Not ideal but it'll all change at some point.

[lapsedhibee]

been wondering about why council tax bands are determined by your property value rather than your income...also, why it's based on what your property was worth in 1991 (i think?) rather than something more up-to-date? seems odd to me, and rather arbitrary. there must be a good reason though?
In a way council tax is half (or mibbe a quarter) way between a property tax and an income tax. The Rates, which Council Tax replaced, was a purely property based tax. Council tax takes into account the number of people who occupy the property, and allows discounts to low-earners (students etc). There was a brief experiment in between Rates and Council Tax called Community Charge. Not sure how that went.

[RyeSloan]

been wondering about why council tax bands are determined by your property value rather than your income...also, why it's based on what your property was worth in 1991 (i think?) rather than something more up-to-date? seems odd to me, and rather arbitrary. there must be a good reason though?

It’s partly due to the fact that council tax is a local tax...so for people who stay in a council area to pay for the council services. That tax is not (directly) related to income tax which is a national level tax.

Property and its occupancy is also rather difficult to hide so is therefore technically easier to levy and collect (unless you are the Yams of course as you can just bump it).

The revaluation thing is a bit of a red herring as although a reval would capture areas where prices have risen faster than average the overall effect would generally be the same. So if Band B is currently 100k in 1991 prices and the equivalent price today is £200k then 200k would be band B still. It does though strike me as odd that there is not some sort of indexation applied and a regular review completed to ensure accuracy...

[Speedy]

been wondering about why council tax bands are determined by your property value rather than your income...also, why it's based on what your property was worth in 1991 (i think?) rather than something more up-to-date? seems odd to me, and rather arbitrary. there must be a good reason though?

Income Tax is only one measure of wealth as well.

A retired millionaire will be more able to pay than someone earning £30k per year.

[Geo_1875]

It’s partly due to the fact that council tax is a local tax...so for people who stay in a council area to pay for the council services. That tax is not (directly) related to income tax which is a national level tax.

Property and its occupancy is also rather difficult to hide so is therefore technically easier to levy and collect (unless you are the Yams of course as you can just bump it).

The revaluation thing is a bit of a red herring as although a reval would capture areas where prices have risen faster than average the overall effect would generally be the same. So if Band B is currently 100k in 1991 prices and the equivalent price today is £200k then 200k would be band B still. It does though strike me as odd that there is not some sort of indexation applied and a regular review completed to ensure accuracy...

Local Income Tax would need to be collected nationally to be cost effective and local government fear that national government would overcharge them for use of the facility. It's easier and cheaper to continue to use existing systems even if they are unfair or unpopular.

[RyeSloan]

Local Income Tax would need to be collected nationally to be cost effective and local government fear that national government would overcharge them for use of the facility. It's easier and cheaper to continue to use existing systems even if they are unfair or unpopular.

Good point and to be honest I’m no fan of a local income tax anyway....mainly as I see those who are paid by PAYE as taking an unfair burden.

A property tax or maybe a land value tax is at least an alternative way to tax people rather than just based on their income and at least to some degree accounts for their asset wealth.

I appreciate that has downsides as well (poor pensioner who just happens to have lived in the same house for decades and now has a low income but large council tax bill) but I often think that the ‘wealth tax’ element of council tax is overlooked.

[AgentDaleCooper]

Good point and to be honest I’m no fan of a local income tax anyway....mainly as I see those who are paid by PAYE as taking an unfair burden.

A property tax or maybe a land value tax is at least an alternative way to tax people rather than just based on their income and at least to some degree accounts for their asset wealth.

I appreciate that has downsides as well (poor pensioner who just happens to have lived in the same house for decades and now has a low income but large council tax bill) but I often think that the ‘wealth tax’ element of council tax is overlooked.

Yeah, this way of looking at it makes sense to me...though i'm not sure what you see wrong in PAYE? That's what i've had and it's been hassle free. The only complaint i have with it is the second job palaver, which is a nonsense.

I think a wealth tax is important as well as an income tax, but also think it would be much fairer to clobber people with multiple homes and mega-bucks savings - though an income-based relief system for the upper bands is available at least, and that makes sense.

[RyeSloan]

Yeah, this way of looking at it makes sense to me...though i'm not sure what you see wrong in PAYE? That's what i've had and it's been hassle free. The only complaint i have with it is the second job palaver, which is a nonsense.

I think a wealth tax is important as well as an income tax, but also think it would be much fairer to clobber people with multiple homes and mega-bucks savings - though an income-based relief system for the upper bands is available at least, and that makes sense.

Sorry my point on PAYE payers was really based on the fact that income taxes ‘unfairly’ fall on them...there is a whole raft of self assessment non PAYE income earners that, how shall I put it, manage to minimise their taxable income.

In other words all those ‘cash in hand’ jobs that never see the light of day for tax purposes but are nice little contributors to people’s income.