Housing

How we make property taxes fairer

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Over the coming months, Backbench will be partnering with Torrin Wilkins, Director of Centre Think Tank for a series of comment pieces. In his column, Torrin will explore prominent policy issues – some of them related to the latest news and others related to his longer-term projects. We’d love for Backbench readers and commentators to respond to Torrin’s policy analysis and ideas, so if you would like to contribute a response, please email editor@bbench.co.uk.  

Please note that all the views expressed in Torrin’s articles are those of Torrin himself and do not necessarily represent the standpoint of Backbench. 

The UK has three main types of property tax. The first is council tax which uses a series of bands to decide how much someone should pay. In England for houses that aren’t new this is worked out based on how much a property was worth all the way back in April 1991, so hardly up to date. Then you have stamp duty which is charged when you purchase a new property or land. This varies depending on the cost and whether you are a first-time buyer. Finally, you have business rates which are essentially a tax on the properties owned by businesses.

What we have ended up with is three taxes all trying to tax the same thing, and they aren’t doing a very good job of it either. Council tax for instance is incredibly unfair as has been shown by Fairer Share with houses in different parts of the country paying vastly different sums of money. The effect of council tax has created a system where those in poorer areas are paying much more than they should have to when comparing the amount to the value of their property.

The solution to this unfair and complicated system is rather simple. Rather than multiple taxes we should simply merge them all into one streamlined tax system, a proportional property tax. This is something Fairer Share has developed, and a policy Centre Think Tank has very supportive of. It would charge one flat rate of 0.48% on the value of properties rather than using more complex band systems.

A proportional property tax also has multiple other benefits as well over the current system. With the abolition of stamp duty, it would make buying a new home cheaper. It would also contain no exemptions for second homes helping to incentivise those people who don’t need a second home to sell them. After all, the UK faces a housing crisis and still there were 495,000 second homes recorded between 2018 and 2019.

The final idea to bring to the table is why we don’t just jump to a land value tax system? A land value tax would involve taxing the value of land at a single rate of tax. After all, it’s also a simple, flat and fair tax system that would solve many of the same issues with our current tax system.  I have openly supported on in the past, even writing an article about it in 1828. Proportional property tax should not be the end to any reforms. It should instead be viewed as a step towards a land value tax giving us more time to transition gradually to a fairer system which brings in even more money to the treasury, but in a way that doesn’t harm most people in our country, with it being the most beneficial for those on lower salaries. 

That why I support a proportional property tax. It means we can get rid of our unfair and complex system of property taxes and replace them with a simple and fair system. It also gets us on the road to a land value tax and allows us to reduce the bills of those living in the poorest households across our country. 

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