A huge shake up of council tax in Wales is being discussed. As part of the Welsh Government's plans, all 1.5m properties in Wales would be revalued, new bands would be created and new tax rates for each band would be set.
Options also being discussed are for new bands to be added at the top and the bottom and rolling revaluation cycles introduced. Discounts, exemptions and premiums would all be overhauled along with the Council Tax Reduction Scheme which provides support to low-income households. As part of the consultation being launched on July 12, there is also a pledge to "continue to explore alternative approaches to the council tax for longer term consideration, such as a local land value tax or unbanded systems."
The Welsh Government says the system isn't fair and the bands used to determine bills are based on information since 2003 so are nearly 20 years out of date and no longer represent current house values or our choices. The amount of council tax charged for band I properties is currently three and a half times as much as band A, yet homes in the top band could be worth at least nine times as much as those in the bottom band.
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The Institute for Fiscal Studies' latest report suggests house prices across Wales had increased by 150% between 2003-2022 so means people living in properties that have increased in value by more than the Wales average since 2003, are likely to be paying less council tax than they should, whilst others in properties whose value has not kept pace with the Wales average have been paying more than they should. The IFS said the system is "out-of-date, regressive and distortionary".
However, the Welsh Government says the plan isn't to increase the total amount of council tax raised overall from council taxpayers through this exercise but to redistribute the money individual households pay. They say it is not an immediate solution to the current cost of living crisis but "will help many households to better cope with these events in the future as we create a fairer Wales". Finance minister Rebecca Evans said: "The reforms are not intended to raise more revenue from council taxpayers overall as, while some people could pay more, many others would pay less, and we will consider the need for transitional arrangements for any changes."
Modelling of how many homes would change bands if the current ones were used showed 25% would go up and 25% would go down.
The cost of the changes is currently estimated to be £10m but depending on the final system decided upon could change that and a full financial review will take place.
What is council tax?
Council tax raises £2bn of the £10bn needed to run services like schools, social care, transport, housing, fire and rescue, policing and hundreds of other community services. By far the biggest area it funds is education, then social services, housing and police and fire services.
How is it worked out?
It was introduced in 1993 and has low admin costs to government and low levels of fraud. Each property is placed in one of nine tax bands, A to I. The Welsh Government added an additional tax band (Band I) for the highest value properties min April 2005, but council tax bills in England and Scotland are based on 1991 valuations.
The independent Valuation Office Agency assesses property values and places each property into a band. Each band attracts a tax rate relative to the middle point, band D, and these tax rates are set out in legislation by the Welsh Government. However, the band D charge for each local area is set locally by councils as part of setting their annual budgets so, for example, the band D charge ranges from £1,573 in Caerphilly to £2,099 in Blaenau Gwent.
Nearly half of households in Wales (48%) receive some form of support.
Why should it change?
Welsh Labour said in its manifesto it wanted a fairer system, and say the bands being 20 years out of date mean the tax people pay no longer reflect circ*mstances. Post election, it is something that Labour and Plaid Cymru, as part of their co-operation agreement are now working towards.
The Welsh Government say in its consultation that the bands no longer represent current house values or our choices, and we know the property market in Wales has changed significantly since 2003. In addition, the amount of council tax charged for band I properties is currently three and a half times as much as band A, yet homes in the top band could be worth at least nine times as much as those in the bottom band.
If my property value has increased, will it automatically mean higher council tax?
No. The Welsh Government says if your property value has increased over the last 20 years, this doesn’t necessarily mean your council tax bill would increase. A revaluation would update everyone’s tax band, and a new set of bands according to the latest data would be set.
However, substantial physical improvements that have been made to properties that have not been sold to a new owner since 2003, would also be fully captured. It is not possible to make such changes without conducting a revaluation.
The aim of this is that property values as from April 1, 2023, would be used for the new system.
What happens next?
We've already heard from the Welsh Government about its plans but taking this to public consultation moves it forward again. This is the first phase of consultation, which would be followed by property valuations, engagement and development of proposals and a second proposal in summer 2023.
The relevant laws or regulations would need to be passed or introduced before the possible implementation date of April 1, 2025.
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