Typical house in the Forest Road area of Edinburgh
The Institute for Fiscal Studies has said that homeowners with larger houses will have to pay 50 per cent more council tax in Scotland than in England.
The changes to the levy could lead to a 22.5 per cent increase in Band H properties in Scotland, meaning households could spend almost £800 more a year in council tax.
This reflects a growing divide between the country’s tax system and England’s tax system and comes after a previous jump in 2017.
While a Band H home in England pays double the tax of a typical Band D property, in Scotland the ratio is on track to rise to three times that.
David Phillips at the IFS said the tax raid was in response to increasing financial pressures in Scotland.
“Facing a tough budgetary situation, the Scottish Government has again proposed increasing taxes on almost a quarter of households living in properties that have the highest assessed values for council tax purposes,” he said.
“This would be a progressive tax increase, with Band H properties potentially paying around £800 a year more in council tax, rising to £175 million: an increase of around 2 per cent in the higher (42 per cent) rate of income tax Equal to growth.”
Increase in Scotland’s top council tax band will add £1,023 to household bills
The exact amount of tax paid varies by council. Each local authority usually decides how much tax it wishes to raise and sets the cash amount paid by a specific property in Band D, with the levy on other properties determined as a proportion relative to that.
As a result of the proposed changes, councils in Scotland could reduce the tax paid by lower-rated homes, while increasing the burden on those with higher-rated properties, however.
Mr Phillips said this was unlikely to happen in practice.
“Given the difficult financial situation facing both the Scottish Government and councils, this increase in revenue is to be expected,” he said.
When it announced proposed changes to bands E, F, G and H last month, the Scottish Government said the average annual increase for 2023-24 would be £139, £288, £485 and £781 respectively, “potentially It will definitely increase.” “An additional £176 million, with approximately 28 per cent of properties affected.”
It says, “The proposals will bring council tax into line with the Scottish Government’s fair and progressive approach to taxation.”
Consultation on the changes closes next week.
Mr Phillips said there is an argument for moving forward, as the value of the average Band H property in Scotland is eight times that of the typical Band A property, while the tax payable per year is about half that proportion.
He said, “Band H properties were worth at least eight times that of Band A properties by 1991, and even after the proposed reforms will face a tax bill that is still only 4.5 times larger.”
“This means that measured as a share of the value of the property, they will face a tax rate that will not be more than half that of a Band A property. And for the highest value properties, the differences are even more pronounced: for example, a property worth £400,000 in 1991 would be taxed at only 1.1 per cent of its 1991 value, while a property worth £20,000 in 1991 would be taxed at 4.7 per cent . ,
Alternatively, he suggested a radical change in the way tax bands are determined.
“The Scottish Government is intent on ignoring the important issue of revaluation of properties – continuing the base council tax on property values from 1991 could easily mean that half or more of the properties are effectively in the wrong band and, therefore, their occupiers Facing wrong tax bill,” he said.
It is understood there are no plans to change the system in England.
