Council tax - revaluation and reform: key findings summary

Longer-term support with paying tax bills

Many of the lowest-income households are unaffected by changes in gross council tax liabilities because their bills are covered by the means-tested CTRS. Moreover, if council tax were made less regressive, our modelling indicates that many more low- and middle-income households would see their bills fall than rise.

However, some low- and middle-income households living in high-value properties would face large increases in bills, especially under the less regressive reform options, and would not be protected by the CTRS as it stands. Some of these households may struggle to pay these higher bills.

Measures could be put in place to provide longer-term support for these groups.

• For those with low assets as well as low or middle incomes, an expanded CTRS could provide support with paying bills. For example, when the Scottish Government increased tax rates on council tax Bands E to H in 2017, it introduced a special CTRS which covered the increase for single adults with incomes below £321 a week and couples with income below £479 a week;^[xvi],^[xvii] a similar scheme could be used if council tax were revalued and reformed. The amount of support provided through the main CTRS scheme could also be increased. We estimate that reducing the withdrawal rate for CTRS from 20% to 10%, for example, would extend entitlement to 200,000–300,000 more low- to middle-income households and increase the entitlements of about 200,000 existing claimants, at a cost of between £130 million and £150 million a year.
• For those who own their home but have low current incomes and/or liquid assets, a deferral scheme could allow payment of at least part of their council tax bill to be deferred for a period of time (for example, until sale of the property or death, up to a limit of 5 or 10 years). Such schemes operate in a range of other countries including Canada^[xviii], Ireland^[xix] and the US^[xx] and a similar scheme operates for the cost of care homes in the UK, including Scotland.^[xxi] Typically such schemes are not available to all taxpayers but are instead restricted to groups that are felt more likely to struggle with paying their bill or moving to a cheaper property. This may include those with incomes below a certain threshold, pensioners, people with disabilities and families with children. Interest is charged on deferred tax bills both to cover the costs councils face in borrowing money until the deferred bill is paid and to make sure only those who really need to use the scheme do so. The numbers of households potentially eligible for such a scheme would depend on its design. To give a sense of scale, around 4% of households and around 8% of eligible households took advantage of such a scheme in British Columbia which was available to the over 55s, families with children, people with disabilities, and widows/widowers.^[xxii]