Higher-income neighborhoods poised for increased council tax under proposed changes: Are you among those potentially impacted?
Council Tax Rates Set to Vary Under Government Funding Reforms
The British government has announced plans to reform council tax rates across the country, with the changes expected to be staggered over three years. Under the new rules, which are set to take effect between 2025/26 and 2028/29, council tax rates will vary by area depending on relative wealth and local needs [1][3].
According to the Institute for Fiscal Studies (IFS), wealthier areas are likely to see an increase in council tax, while deprived areas will receive more central support to limit rises. For instance, inner London councils could face budget cuts of 19%, while the north and Midlands could see increases of up to 6% [2].
Households could pay up to 4.99% more in council tax next year, with some near-bankrupt councils potentially applying to hike as much as 9% [1]. However, the government maintains that council tax increases will remain subject to local decisions within defined referendum limits [3].
The reforms are intended to help lower-income households but could have a negative impact on local services such as adult social care and bin collections. The government's decision on how to measure wealth and deprivation is likely to face backlash, as it remains unclear how the government will decide which areas are wealthy and which are deprived [1].
Some London boroughs, like Islington and Kensington and Chelsea, are generally considered wealthy, but they also contain pockets that are among the most deprived in the country. Areas with higher deprivation and greater service needs will receive increased central government funding, reducing their council tax pressure [2].
Additional reforms include changing the default payment schedule from 10 to 12 monthly payments to make payments easier for residents, but this will not reduce the total annual council tax owed [1][5].
In summary, the council tax rates in your specific area will depend on its wealth, service needs, and local council decisions under the government funding reforms. Wealthier areas are likely to see higher council tax, while deprived areas will receive more central support to limit rises. If you specify the particular area, more tailored projections may be available from local council or government resources.
[1] The Guardian [2] BBC News [3] Local Government Chronicle [4] Institute for Fiscal Studies [5] Money Saving Expert
- Investing in property in areas with higher deprivation and service needs might offer potential for reduced council tax, as these areas will receive increased central government support under the reforms.
- The changes in council tax rates may influence one's personal-finance planning, as wealthier areas could experience an increase, causing a need for more funds to meet the increased tax obligations.
- The political environment and government funding reforms, such as the changes to council tax rates, play a significant role in general-news and the financial health of local businesses that rely heavily on public services.
