UK Property Owners Could Face Tax Threat

by Jason Gorringe, Tax-News.com, London

26 July 2001

According to recent reports, some UK property owners could face a nasty shock in 2005 if the government's proposed revaluation of British property and subsequent council tax hike goes ahead. All of Britain's 21 million homes are to be included in a review of property values set to coincide with the next General Election, and those homeowners who have enjoyed soaring property prices may come down to earth with a bump.

At present, council tax is based on 1991 property prices. However, in areas such as London, where average house prices have increased by over 122% since 1993, and also in the South East, the South West, and East Anglia, the government feels that the situation needs to be reassessed. However, a spokeswoman from the Department of Transport, Local Government and the Regions, insisted that the plan was not calculated to increase the overall council tax yield, but to redistribute the burden in a fairer way. 'This will not lead to any overall increase or decrease in the amount raised by council tax,' she said earlier this week. Property owners in areas where the market has crashed, or failed to keep pace with the national average should see a reduction in their value linked council tax bills.

The first bills will be issued in 2007, and will be followed by a fixed 10 year cycle of revaluation if the proposal comes into effect. However, experts fear that the timing of the revaluation may have been unwisely chosen, and warn that Prime Minister Tony Blair may face a backlash from voters in areas where council tax rates look likely to rise.

Although there has been speculation in the British media that the government plans to restructure the existing council tax bands to differentiate further between those on the lowest and highest rungs of the property ladder, ministers are remaining close-lipped for the moment, refusing to confirm or deny the rumours. At present in the UK, homeowners in the UK pay only three times as much council tax than those in the lowest band, even if they are living in a multi-million pound property.

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