A significant overhaul of council tax is reportedly under consideration by the Chancellor Rachel Reeves as part of a broader effort to raise government revenue, potentially affecting more than a million households. Proposals involve dramatically increasing charges for the highest council tax bands in England, with band G potentially doubling from around £3,800 to £7,600 annually, and band H from approximately £4,560 to £9,120. This move would particularly impact London and the South East, regions characterised by higher property values, and raise serious concerns about financial hardship for pensioners on fixed incomes and families who have stretched to buy their homes.
The impetus behind these proposed hikes appears tied to a pressing fiscal challenge. The Office for Budget Responsibility (OBR) has reportedly downgraded productivity growth forecasts by 0.3 percentage points, adding an estimated £21 billion to the public finance deficit. Additional pressures from sluggish economic expansion, increased debt costs, and policy reversals on benefits could add another £20 billion to the shortfall. With little scope for spending cuts, tax increases, including on property, appear inevitable. Labour insiders suggest that taxpayers earning above £45,000 annually—the top third of earners—are being targeted for these measures, positioning this group as the wealthy to bear the brunt of revenue raising.
Labour’s approach, however, is controversial. Critics highlight that the threshold includes many middle-income jobs like HGV drivers, teachers, and catering managers, blurring lines between wealthy and working people. Tory opposition voices accuse Labour of penalising hard-working families, with figures such as Shadow Business Secretary Andrew Griffith warning of significant reductions in take-home pay for millions of middle earners. Tory leader Kemi Badenoch has cautioned that council tax reforms could push some pensioners out of their homes, echoing wider fears about the impact on older homeowners who purchased properties decades ago. Nigel Farage of Reform UK described the proposals as an “assault on assets” stirring consternation among the elderly.
While doubling charges on existing top council tax bands seems a fast route to raising revenue, there is also talk of more radical reforms, such as replacing council tax with an annual property value levy. Nevertheless, sources indicate that Reeves is leaning away from these more drastic options, likely due to the political sensitivities involved.
Currently, a majority of upper-tier English local authorities are imposing near-maximum council tax increases, with 88% applying a 4.99% hike this year. This marks the third consecutive year of maximum or near-maximum hikes for many areas, reflecting mounting financial pressures on local governments as central funding dwindles. The government has further authorised increases above the usual 5% cap in certain councils, resulting in rises up to 10% in places like Bradford and 9% in Newham, affecting millions of residents.
Broader analyses indicate that these escalating tax burdens do not affect all households equally. Research shows council tax consumes nearly 4.8% of income for the poorest households—more than triple the 1.5% borne by the richest. This regressive tax effect intensifies worries about the fairness of ongoing hikes, especially when combined with increases in other household costs including National Insurance, capital gains tax, and stamp duty. One study projects that British families will face average tax increases of £1,112 from April 2025, with wealthier households losing an average of £2,729 in disposable income, while even the poorest will face nearly £800 tougher financial conditions. The South East, West Midlands, and East of England regions are expected to be hardest hit overall.
With council tax rises due alongside other household bill increases from April—in areas like broadband, water, and vehicle tax—the financial squeeze on families continues to deepen. Experts urge individuals to seek any available discounts and shop around to mitigate the cost pressures.
In this context, Rachel Reeves faces mounting pressure as she prepares the autumn Budget, grappling with a growing fiscal gap and political backlash. The direction she takes on council tax and wider tax policy will significantly influence both public finances and the everyday lives of millions across England.
📌 Reference Map:
- Paragraph 1 – [1] Daily Mail
- Paragraph 2 – [1] Daily Mail
- Paragraph 3 – [1] Daily Mail
- Paragraph 4 – [1] Daily Mail
- Paragraph 5 – [2] Evening Standard, [4] Sky News
- Paragraph 6 – [5] ITV News, [3] IEA Report
- Paragraph 7 – [6] ITV News
Source: Noah Wire Services