Two Governments: Tax

Is council tax doubling? What the end of the cap for six councils tells us

Mon, 28 Sep 2026 00:00:00 GMT

My verdict: Mostly right. The government is right to share out grant by need and to expect every council to raise close to average council tax. It is wrong to lift the cap with no path for the rise, and to leave in place the 1991 valuations that make the tax unfair everywhere.

In brief

Most bills in England rose by about 5% this April, taking the average Band D bill to £2,392.

One council's proposed 94% rise is a plan for next April, not a national trend. It would still leave that council's Band D bill £414 below the English average.

The rise follows a new funding formula that assumes every council can charge close to average council tax, which cuts grant to the councils that charge least.

Behind both sits a tax based on what homes were worth in April 1991, which charges the most valuable homes a far smaller share of their value than the cheapest.

I think the funding change is mostly right, but it needs a published path for the six councils affected and a revaluation of the tax itself.

What has actually been proposed

From April 2027, six councils will be free of the cap on council tax rises. The government will set no referendum limit in 2027-28 and 2028-29 for Wandsworth, Westminster, Kensington and Chelsea, Hammersmith and Fulham, the City of London, and Windsor and Maidenhead.

The doubling headline comes from one of them. On 15 September, Wandsworth Council said its council tax would need to rise by £958 for a Band D home from April 2027, unless the government changes its funding. That is a 94% rise on this year's Band D bill of £1,020.35. According to the BBC, half of that bill goes to the Mayor of London. If the whole rise falls on the council's half, that half nearly triples.

Nothing has been decided. The council says its final figures will come in its budget in February 2027. The Conservative leader, Kemi Badenoch, says her party has instructed lawyers to challenge the funding cut behind it.

Westminster, whose Band D bill is about £1,049, is reported to be considering a rise of up to 100%. It has not announced a figure.

Most bills are rising by about 5%

For almost everyone else, this year looked like most years since 2016. The average Band D bill in England rose by £111, or 4.9%, to £2,392 in April. Of 384 authorities, 274 raised their share by the full 5% allowed without a referendum.

That limit is 5% for councils that run social care, made up of 3% for general spending and 2% for adult social care. A council that wants to go higher must win a local vote first. Seven councils in financial difficulty were allowed more this year, up to 9% in North Somerset, Shropshire and Worcestershire.

So the doubling is one council's proposal. Across England, bills rose by about 5%. Even if that council goes ahead, its Band D bill of about £1,978 would still be £414 below this year's English average.

Why their bills were so low

The six councils now free of the cap had the lowest bills in the country. The local government minister, Alison McGovern, told MPs in December that their taxpayers paid up to £1,280 less than the average council taxpayer.

A council can keep its rate low if it has a lot of valuable property to tax, a lot of grant from central government, or both. Inner London has had both. The rate is set for a Band D home, but a council with many homes in the higher bands raises more from each pound of it.

Until this year, central government grant was shared out using an assessment of each council's needs and of how much council tax it could raise. That assessment was last brought up to date for 2013-14 and then left alone. The government says this let areas with strong tax bases keep their bills low while others paid more for worse services.

What changed in the funding formula

From April 2026, the government replaced that system with a new formula, known as the Fair Funding Review 2.0. It shares out money using an up-to-date measure of need, including deprivation and the cost of delivering services in each area.

The key change for these councils is how the formula treats council tax. It now assumes every council could charge the national average Band D rate, set at £2,060 for 2026-27 and rising to £2,265 for 2028-29. Each council's grant is reduced by what that assumed rate would raise, whether or not the council actually charges it.

For a council charging far less than average, that is a large cut. Kensington and Chelsea's leader, Elizabeth Campbell, says its funding has been cut by more than £100m, a gap she says a council tax rise alone cannot fill. Transitional arrangements protect 95% of these councils' previous income at first, which is why the pressure lands next year rather than this one.

Then the government removed the cap for the six, for two years. The Institute for Fiscal Studies estimated at the time that two of them might need rises of up to 75%, according to the Independent.

The government argues this is fair. McGovern said it would let more than £250m be shared out according to need, rather than subsidising bills for half a million households in those six areas. The Conservatives say it punishes councils for keeping tax low. The council that proposed the 94% rise says it should not be penalised for running efficient services.

A tax still based on 1991

The funding formula has been brought up to date. The tax it relies on has not. Every home in England sits in one of eight bands, from A to H, according to what it would have sold for on 1 April 1991. A home worth up to £40,000 then is in Band A, and one worth more than £320,000 is in Band H.

Those values have never been updated, and house prices have risen by very different amounts since. In 2020 the IFS found that average prices in London were more than six times their 1995 level, compared with barely three times in the North East. In 2024 it estimated that at least half of homes are effectively in the wrong band, with homes in the North and Midlands often in too high a band.

The bands are also tilted in favour of the most valuable homes. A Band H home pays three times as much as a Band A home, despite being worth at least eight times as much in 1991. The IFS calculated that a home worth £25,000 in 1991 pays about 4.7% of that value each year, while one worth £500,000 pays about 0.7%.

Homes in inner London have risen in value far faster than homes elsewhere since 1991. A national revaluation would move many of them into higher bands. No government in England has attempted one since council tax began in 1993.

What is already being done

England has not revalued, but it has started taxing the top end separately. From April 2028, owners of homes worth £2m or more will pay a High Value Council Tax Surcharge of between £2,500 and £7,500 a year, on top of council tax. The Valuation Office Agency is valuing those homes at 2026 prices, ignoring their current bands.

The surcharge is expected to raise about £430m a year. That is under 1% of the £46.8bn raised in council tax in England this year. Councils will collect it, but on behalf of central government.

Scotland is doing something similar. It plans two new bands from April 2028, Band I for homes worth £1m to £2m and Band J above that, using up-to-date values. Its government says a general revaluation would need a mandate from an election and will not happen this decade.

Wales is the only part of Britain to have revalued. It did so in 2005, using 2003 values, and added a ninth band for the most valuable homes. A law passed in 2024 requires another revaluation from April 2028, but the new Welsh government says it is still deciding whether to go ahead.

In England, the Prime Minister said in July that there were "big decisions ahead" on council tax. Downing Street said reports that he was actively considering replacing it were "not true". The government's recent changes to how council tax is run did not seek views on fundamental reform.

Who pays when bills rise

Council tax is charged on the home whatever the income of the people in it, so steep rises fall hardest on households with the least. Councils in England were owed £7.4bn in unpaid council tax at the end of March 2026, up 11.8% in a year. That is about a sixth of a year's bills.

Help for low-income households is run by each council. In 2024-25, 3.7 million people in England received council tax support worth £4.2bn. The IFS found that almost every council has made its scheme less generous since 2013, leaving the poorest tenth of households £106 a year worse off on average.

The biggest single discount goes to people who live alone. About a third of homes in England get the 25% single person discount, worth about £2.5bn in 2023-24. It does not depend on income, so a wealthy person living alone gets it as readily as a pensioner on a small income.

What to take from it

Some bills may nearly double because three things have met at once. A grant formula that had not been updated for more than a decade was fixed. The government removed the cap for the councils that lost most. And the tax underneath still rests on house prices from 1991.

What I'd do instead

The grant formula has been brought up to date and the tax underneath it has not. Two national changes would fix that, and a third would steady the six councils now free of the cap.

Revalue every home in England, keeping the total raised the same

The Valuation Office Agency is already valuing the most expensive homes at 2026 prices. Extend that to every home, and reset the bands so that the country as a whole pays no more.

How it would work: The Valuation Office Agency values every home at current prices. New band thresholds keep the same share of homes in each band as now, so total council tax is unchanged at the start.
Who it affects: The IFS estimates at least half of homes are in the wrong band, so many would move. Bills would tend to rise in London and the South East and fall in the North and Midlands.
What it costs: The valuation itself, which the government has not costed. The surcharge exercise, covering fewer than 1% of homes, is a starting point for the method.
Tried before?: Wales revalued in 2005, using 2003 values. Scotland has consulted on revaluation but says it will not happen this decade.
The risk: The losers are concentrated and vocal. Without a phase-in over several years, some households would face large rises at once.

Make the top bands pay closer to their value, and keep the money local

Raise the charge on the top bands and add bands above H, as Scotland is doing, paying for a cut in the lowest bands. Fold the £2m surcharge into council tax so councils keep it.

How it would work: Change the fixed ratios between bands, which are set in law. Band H pays twice Band D today; a higher top ratio would let councils cut bills for the cheapest homes by the same total.
Tried before?: Scotland raised the charge on Bands E to H in 2017 and is adding Bands I and J from 2028. Wales added a ninth band when it revalued.
What it costs: Nothing overall if it is designed to raise the same total. The surcharge's £430m a year would move from the Treasury to councils, so the Treasury would need to replace it.
The risk: Without a revaluation, higher ratios still rest on 1991 bands, so some homes in the wrong band would pay more unfairly. It works best alongside the first proposal.

Replace the lifted cap with a yearly limit for the six councils

Set a published yearly limit that lets bills catch up with the average over several years. Protect residents on low incomes while it happens.

How it would work: Set each of the six councils a yearly limit, for example 25%, until its Band D bill reaches 90% of the English average. A council using it must not cut its council tax support.
Who it affects: About half a million households in the six council areas, the government says. Those on low incomes would be protected from the steepest rises.
What it costs: A slower catch-up delays some of the £250m the government expects to share out more fairly. It would need to fill the gap in the meantime or accept the delay.
The risk: A published limit can become a target, with councils raising the maximum every year. Councils in poorer areas would say it slows the money meant for them.

Sources

Should the government rule out tax rises before the Budget?

Thu, 17 Sep 2026 00:00:00 GMT

My verdict: Partly right. The uncertainty is a real cost. The Treasury should deny the exit tax rumour now. But ruling out every tax rise six weeks early means any shortfall is met by cuts or borrowing that nobody has named.

What happened

In his first big speech as shadow chancellor, Andrew Griffith called on Prime Minister Andy Burnham and Chancellor John Healey to rule out tax rises at the Budget. He singled out small businesses, the self-employed and a rumoured "exit tax" on people leaving the UK, and announced a Conservative review of small-business tax, due to report in December.

Labour said the Conservatives were promising tax cuts without saying how they'd pay for them or which services would be cut. Burnham has repeatedly refused to rule tax rises out, saying the war in the Middle East makes this a challenging Budget. The same day, the Bank of England held interest rates at 3.75%.

What's really going on

In the weeks before a Budget, rumours about tax changes can change what people do. Britain saw a rush of pension lump-sum withdrawals before the October 2024 Budget on a rumour that didn't come true. Talk of an exit tax could do the same to wealthy people's plans to stay.

But the Chancellor's room to promise anything is small. Inflation is rising, energy prices are up because of the war, and the Bank isn't cutting rates, so there's no relief coming from cheaper borrowing. Under the fiscal rules, any shortfall has to be met by higher taxes, lower spending, or bending the rules. Ruling out one of those means leaning harder on the other two.

The strongest case on each side

For ruling it out

Certainty has value. Firms hold back on hiring and investment while they wait to see what a Budget holds.
The tax burden is already at a post-war high, and small firms carry a heavy paperwork load on top.
A firm promise forces the Treasury to look for savings first, rather than reaching for taxes.

Against ruling it out

Six weeks out, with inflation rising, it means any gap is filled by cuts or borrowing. Neither has been named.
Promises not to touch the headline taxes led governments to freeze tax thresholds instead, which raises money without anyone announcing a rise.
The Conservative position comes without costings, which Labour was right to point out.

My verdict: partly right

Griffith is right that uncertainty costs something, and the government has let the rumours run for too long. Ruling out all tax rises wouldn't remove that cost. It would move it to spending cuts or extra borrowing, and neither Griffith nor the government has said which.

I'd be equally critical of the government's reply. Burnham's answers have leaned on Griffith's part in the 2022 mini-budget rather than his argument, and "difficult decisions" tells people nothing about which ones. Neither side is telling voters what the real choices are.

What I'd do instead

Rather than promise what won't happen, tell people what the real choices are. Three steps, most urgent first.

Rule out an exit tax this week

If the Treasury isn't planning one, it should say so on the record now, rather than let the rumour run until 28 October.

How it would work: The Chancellor writes to the Treasury Select Committee confirming there will be no exit tax at this Budget. One paragraph, on the record.
Who it affects: Wealthy, internationally mobile people deciding where to be tax resident, many of them already weighing the end of the non-dom regime in April 2025.
What it costs: Nothing now, but it gives up a real option. Canada, Australia and Norway all tax some gains when people emigrate, so this isn't a fringe idea.
The risk: If the gap turns out larger than expected, the Chancellor has one fewer lever, and critics will say the government is protecting the wealthy.

Publish a pre-Budget options paper

Four weeks before the Budget, set out the size of the gap and the realistic ways to close it, with what each would raise and who would pay.

How it would work: The Treasury lists the tax and spending options it is considering, each with a rough yield or saving. Much of the costing exists already: HMRC publishes estimates of what standard tax changes raise.
Tried before?: Yes. Ireland publishes costed tax options ahead of every Budget. Britain had a Pre-Budget Report each autumn from 1997 to 2009.
What it costs: Very little. The Treasury does this analysis anyway; this simply publishes it.
The risk: People act on changes they can see coming, such as selling shares before a capital gains rise. The fix is to say that any change on the list would apply from the day the paper is published.

Pause Making Tax Digital and bring back tax simplification

The cheapest, most sensible idea in Griffith's speech. The government should take it rather than dismiss it because of who said it.

How it would work: Hold the threshold at £50,000 for now, delaying the extension to sole traders and landlords with income over £30,000 in April 2027 and over £20,000 in April 2028. Re-create an independent Office of Tax Simplification, abolished in 2023.
Who it affects: Self-employed people and small landlords facing quarterly digital reporting. The £20,000 stage alone would bring in around 900,000 more people.
What it costs: HMRC expects the scheme to cut errors and bring in more tax, so a pause gives some of that up. The Treasury should publish how much.
The risk: Businesses and software firms that have already prepared lose out, and a pause can quietly become permanent.

The trade-off

A published list invites every lobby to fight every item, and the Chancellor loses the element of surprise. I think that's worth it. Pension withdrawals jumped before the 2024 Budget on a rumour that never came true, so secrecy already has a cost.

How we'd know it worked

No rush of pension withdrawals or residency changes in the weeks before the Budget, and nothing announced on 28 October that wasn't on the published list.

What to watch

Whether the Treasury kills the exit tax rumour before the Budget.
The OBR's forecast on 28 October, which sets the real size of the gap.
The Conservative small-business tax review in December, and whether it comes with costings.