Average homeowner could save £1,000 a year under council tax shake up, but London and South East to pay more
The latest research by Yopa has revealed that the average household across England could be set to save £1,000 per year should the government decide to scrap stamp duty and replace current council tax with an annual homeowners tax.
Yopa analysed* the current average annual council tax bill across every local authority in England, then modelled what an annual homeowner tax could look like using the emerging framework under discussion. This proportional property tax framework could potentially involve a national levy set by the government to replace SDLT, and a local tax set by councils to replace council tax.
For the local tax on homes valued below £500,000 (levied on values up to a cap set at the £500,000 level) this would be based on a suggested average rate of 0.44% (or a minimum payment of £800 per year) - although the rate and charge would ultimately be set by local councils.
For the national tax on properties at £500,000 and above, Yopa applied the suggested 0.54% rate on the value between £500,000 and £1 million, and 0.81% on the value above £1 million. This was considered alongside the local council charge, to provide a comparison against today's council tax.
The research shows that, at a national level, the average home in England currently pays £2,280 a year in council tax. Under the potential new changes and based on the current average house price of £290,956, homeowners would pay £1,280 per year in homeowner tax, a saving of £1,000 per year.
The biggest reductions in this annual cost for homeowners would be seen across the more affordable areas of the market,including the City of Nottingham where the typical household could save £1,816 a year.
Homeowners in Gateshead (-£1,778), County Durham (-£1,751), Liverpool (-£1,746) and Pendle (-£1,735) could also stand to make some of the largest annual savings should these changes come to fruition.
See how much the average household stands to save in your local area online here
However, not every area would be better off. Yopa's analysis shows 35 local authorities could see higher annual costs as a result of implementing a homeowner tax versus current council tax costs and these 35 areas are almost entirely located within London and the South East - with a smaller number in the East of England.
The largest modelled increases are concentrated in prime London and parts of the prime London commuter belt.
The biggest increase would be seen in Kensington and Chelsea where the average annual cost would increase by £7,057.
The City of Westminster (£4,167), the City of London (£2,792), Hammersmith and Fulham (£2,359), Wandsworth (£2,171) and Camden (£2,124) would also see some of the largest increases, as would Richmond upon Thames (£1,585), Islington (£1,274), Elmbridge (£1,139), Windsor and Maidenhead (£861) and Southwark (£861).
Verona Frankish, CEO of Yopa, commented:
"So far, the debate around replacing stamp duty with an annual homeowner levy has focused largely on the potential benefits to homebuyers, but it also has implications for existing homeowners who could see a change to the annual amount of tax they currently pay.
We could see a potential homeowner tax replace current outdated council tax thresholds and whilst details remain very thin on the ground, our analysis suggests many areas could see meaningful savings as a result.
However, it's important to consider that the proposed rates have yet to be confirmed and could vary depending on decisions taken by local councils. Given that the government stands to lose a considerable sum in stamp duty receipts, it may also look to claw some of this back by setting higher homeowner tax thresholds.
Transparency on how the system is designed and implemented will be crucial so that homeowners can plan with confidence and so the market is currently waiting with bated breath for more details to emerge in the upcoming Autumn Budget."
