Council tax inequality: Million-pound homes pay as little as 0.03%

The inequality of the council tax system has been laid bare in new figures shared exclusively with This is Money. People living in London are paying, on average, 0.27 per cent of their home's value in council tax each year according to analysis by analytics firm PropertyData - meaning they have the cheapest bills in the country on a proportional basis.

Meanwhile, those based in Newcastle Upon Tyne and Preston are paying 0.79 per cent, a larger proportion of their property value than anywhere else in Britain. It comes as Labour is said to be considering a shake-up of the council tax system, which has long been criticised because residents of some wealthy areas pay far less proportionally than those in more deprived ones. Currently, homes are put in bands varying from A-H. The bills people in those bands pay are set by each local authority and vary wildly across Britain.

For example, in Wandsworth, south London, the average council tax bill for someone living in a Band D property is £990.07 while in Newcastle, the average Band D property currently pays £2,463.98 in council tax. That's despite the average property in Wandsworth being £691,000 compared to £205,000 in Newcastle. The average council tax bill for a band D home in England in 2025-26 is £2,280. The analysis by PropertyData, which was based on band D homes, suggests households in Newcastle and Preston are paying almost three times more in council tax as a proportion of local house prices. The research also revealed people living in Liverpool are paying the equivalent of 0.73 per cent of their home's value in council tax each year and in Nottingham it is 0.72 per cent. At the other end of the scale, households in Romford in London and Chelmsford in Essex come are paying the equivalent of 0.48 per cent of their homes' value in annual council tax.

Another problem with the council tax system is that bands are based on a property's value in 1991. It means that, in areas where house prices have risen rapidly, those living in very expensive homes can still pay relatively little in tax. PropertyData's research highlights a house in Kilburn, North West London, which that sold in July 2024 for £3.46m. Based on its 1991 value, it is in council tax band F - which takes in properties worth between £120,001 and 160,000 at that time. The homeowner there will pay £2,940.96 in council tax each year equating to 0.03 per cent of its value. But the new owner of a band F house in Preston, which sold in December 2024 for £202,500, would pay £3,396.94 - representing 1.67 per cent of its value.

Similarly, the occupant of a band E house in Preston, which sold for £148,500 in July 2025, currently pays £3,015.67 in council tax each year - the equivalent of 2.03 per cent of the purchase price. Compare that to a band E house sold for £4.3million in North West London in August 2024 which has a council tax bill of £2,487.85 - a mere 0.06 per cent of the home's value. Based on council tax as a proportion of house prices, it means the band E property in Preston is 29 times more expensive than the North West London home. 'Council tax is unfair and arbitrary,' says Michael Dent, director at PropertyData. 'Based on outdated 1991 valuations, home owners now experience a geographic and individual property lottery where the amount they pay depends on a theoretical 34-year old valuation, and how prices in their area have changed since then. 'Properties in the same council tax band are supposed to be worth roughly the same nationally, but uneven price growth has resulted in wide variations in the average value of band D properties by city.'

There have been widespread calls for reform of council tax. Reports have indicated sweeping changes to the property tax system could be on the cards in the Autumn Budget on 26 November. One suggestion is that the Government is considering replacing stamp duty and council tax with a single annual levy. The idea for this came from a report last year by Tim Leunig, chief economist at centre-Right leaning think-tank Onward. Leunig suggested the current stamp duty should be replaced with a new national annual property tax that does not apply to homes under £500,000. There would then also be a local property tax to replace council tax for all homes, no matter the value.

This local property tax would be charged at 0.44 per cent a year on the first £500,000 of all homes, capped at £2,200, with a minimum charge of £800 per household per year. For a £100,000 home, the council tax bill would be £800, for a £300,000 home, the bill would be £1,320 and for a £500,000 property or above, the full £2,200 would be paid. It would mean that in areas where house prices are cheaper, households would have much to gain. Mr Leunig says the rates should be linked to inflation and the property's value for tax purposes reset each time the house is sold. It was also mentioned in Leunig's report that councils should be allowed to set their own rate. However, he argues that charging 0.44 per cent of the value of a house up to £500,000 would be enough to cover the current revenues local authorities make from council tax - £37 billion in the fiscal year 2023-24.

Renters would not have to pay the new property tax under this system, as their landlord would be required to - but landlords would likely increase their rent to cover the bill. Aside from a council tax linked to today's property values, another route for the Government to explore could be to create additional bands. Housing Secretary Steve Reed has ruled out revaluing existing council tax bands during this parliament, which lasts until 2029, but creating additional ones may not be included in this. At present, there are eight council tax bands going from the cheapest A band to the most expensive H band. Jeremy Leaf, north London estate agent and a former Rics residential chairman thinks the creation of new bands would be easier to introduce than a full scale re-assessment based on today's property values.

He believes at least an extra two bands could be created and this would help bring in some much needed extra revenue for the Government. 'The relationship between present property values and council tax paid has changed as property markets have evolved significantly since,' says Leaf. 'It seems that those places where values have increased most tend to be underpaying and vice versa. Lower income households generally are paying a higher percentage of their income on council tax.'

'However, we have been told that a revaluation will not happen for the time being as perhaps the inevitable increases for some households would be difficult to accept politically. 'On the other hand, we consider an extension of the present bands, which are determined by each local authority, could easily be done and bring in some additional revenue.'