Revaluation and reform of council tax in Scotland: design considerations and potential impacts

7. Conclusions

This report has analysed the potential impacts of revaluing and reforming council tax on different geographic areas and types of households in Scotland. The systems modelled are indicative only but do illustrate the scope for change.

Revaluation on its own would address the fact that, under the current system, two properties now worth the same can attract very different tax rates, but would not reduce the regressivity of the system. To do that, the relative tax rates applied to low-value properties would need to be reduced, while those applied to high-value properties would need to be increased. To reduce jumps in tax rates at band thresholds and to differentiate more finely between properties of different values, additional bands could be added, or a move made towards a continuous system based on exact (unbanded) property values as in Northern Ireland (nidirect, 2025). Section 4 showed that, according to our estimates, making council tax less regressive would, on average, reduce bills for low- and middle-income households, younger adults, single and widowed pensioners, disability and health-related benefit recipients, and renters. Section 3 shows that, according to our estimates, it would reduce average bills in more deprived parts of Scotland and in areas where property values have fallen significantly behind the national average in recent years, such as Aberdeen City. Conversely, we estimate that higher-income households, older working-age adults (aged 45 to 64), couples, owner-occupiers and residents of more affluent areas would pay more on average – in some cases substantially more.

The impact of reforming council tax would depend on more than just any new property valuations, tax bands and tax rates. It would also depend on whether and how the grant funding provided to councils on top of their own tax revenues was adjusted, and how councils responded to the new council tax system and grant allocations. If, for example, grant funding was left unchanged, and councils wanted to maintain their spending on services following council tax reforms, each would need to raise as much council tax and so charge the same average bill as in the absence of reform. In this case, those councils seeing more properties in lower bands and/or facing lower relative tax rates would need to raise their Band D rates, while those seeing more properties in higher bands and/or facing higher relative tax rates could reduce their Band D rates. Council tax reform would redistribute council tax bills within council areas, but not across them.

There are a range of different options for grant adjustment, and for ways in which councils could respond. Currently, the Scottish local government finance system accounts for about 60% of the differences in councils’ tax bases when determining how much grant funding they are provided with^[20], however; other approaches would be possible. The Welsh Government has said it plans to adjust grant funding to account fully for changes in councils’ own revenue-raising capacity following Wales’ upcoming council tax revaluation (Welsh Government, 2024).

Transitional arrangements and mitigation measures could also play an important role in supporting those households facing large increases in bills and/or who may struggle to pay increased bills. Our estimates suggest that most low- and middle-income households would see reductions in bills under less regressive council tax systems but a minority, especially in parts of Scotland with higher property values, would see increases. There is a trade-off between scale and cost for schemes of this nature: schemes providing more support to more households would inevitably cost more.

Finally, there are a number of areas where further analysis may be possible in future. First is modelling the effects of different degrees of grant adjustment, which analysis for England and Wales shows has a significant effect on the geographical impacts of council tax revaluation and reform (Adam et al, 2020a, 2020b). Second, and related to this, is accounting for council tax discounts, premiums, exemptions and means-tested reductions in geographical analysis, which would allow for modelling of changes in net council tax bills across different geographical areas (as well as different household types). Third is more detailed modelling of potential transitional and mitigation schemes, where the use of different data sources (such as the Wealth and Assets Survey), and potentially the collection of new data, could help to fill in gaps and address sample size issues for the main household survey data used in this report, Understanding Society. Thus, there are multiple avenues for further research and quantitative modelling to inform council tax revaluation and reform in Scotland.