Analysis from Maskells Estate Agents reveals the new Office for National Statistics (ONS) official house price index (HPI), which launches in June, could be used to revalue council tax bands.
The new house price index has been described as a way for Government to create a single ‘official index’ on house prices and avoid the confusion created by the many existing indices. In fact, it could have far more reaching consequences, which fundamentally change the way UK property is taxed, suggests Maskells’ Principal and Data Analyst, Charles Curran.
Currently, council tax is calculated on bands based on house prices in 1991 and makes no allowances for house price increases over the past 25 years.
Average council tax on a Band D home in England over the last ten years (Source: ONS):
However, Maskells analysis has found the new HPI uses data from the Valuation Office (VOA), which has details of each property in the UK. Previously, revaluing property for Councils would have required an army of surveyors, which would have been prohibitively expensive. In theory, the new index will make it possible to appraise every home in the country at the touch of a button.
Charles Curran, Principal at Maskells Estate Agents, said:
“Council Tax no longer has any link to the value of a property in real terms, particularly in London and the South East. Instead, the Government rely on Stamp Duty to raise taxes on property, which is only paid if people move.
“While the new index may be of little use, or interest to the market itself, we feel certain it will be of great use to government. Certainly this new HPI would allow local authorities the necessary data to consider revaluing council tax which would provide a more meaningful and sustainable revenue for cash strapped local authorities.”
Curran’s analysis also finds that the new index could be used to:
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Calculate inflation
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Through revaluation of council tax, provide a revenue stream to help drive the Northern Powerhouse
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Provide a quid pro quo for the reduction in stamp duty
As an example buyer of a £5,000,000 house will pay £513,750 in stamp duty and only £2,085 in Council tax in the Royal Borough of Kensington & Chelsea. Might the buyer be prepared to pay an increased Council tax versus a much reduced Stamp Duty?
READ CHARLES CURRAN'S FULL ANALYSIS HERE