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Proportional Property Tax Could Shift Pain To Landlords


A group of MPs has suggested the government consider a "proportional property tax" to replace the current council tax, in a bid to fund the growing cost of social care. Unfortunately, this proposed change will appeal to all concerned EXCEPT landlords – and we can all guess what that means…. 

So What Is It? 

The idea has come from the all-party Housing, Communities and Local Government committee, which is led by Labour MP Clive Betts but with the majority of members being Conservative MPs.

In a new report the committee says "reforms are needed to ensure the sustainability of local government finances, including an urgent solution to the funding of social care in England."

One of its recommendations says the government should "implement changes to council tax and consider wider options for reform" while Betts states specifically: "In the longer term the government should consider options for wider reform of council tax and business rates, including possibly replacing them with a proportional property tax."

Other recommendations include widening the funding base of local government to make it less vulnerable to shocks such as the pandemic, including by giving councils more flexibility over local taxes and other revenue-raising powers.

Various bodies have called for proportional property taxes in recent times. 

How Might It Work?

Most recently a cross-party think tank called Bright Blue wants the government to introduce such a tax as a replacement for stamp duty, urging instead an annual proportionate property tax on the current capital value of houses with a tax exemption for properties worth up to £50,000 and a 25 per cent surcharge for second home owners. Liability to pay would be with owners, not occupants.

The 'Fairer Share' organisation are proposing a flat rate of 0.48% of the current value of your property (so a typical £250k house would pay £1,200 / year). Their proposal sees the new tax replacing council tax, stamp duty and bedroom tax and would only be paid by property owners – so instead of councils having to chase 4.5m tenants for council tax, they will only have to chase 2m landlords and as house prices rise, their income will rise. It also means that local councils will not have to charge council tax to those who live in council homes, which will save them a huge amount of work.

Obviously, for us rent for a typical house will need to increase by £100 / month to cover the cost of this new tax which will make us the bad guys when in reality, it is simply a change of tax collection responsibility from local authorities to landlords.

Our Analysis

Obviously we are worried that this will be implemented adding yet more cost and work for landlords whilst making us look like the bad guys for increasing rents when in reality, it is just a transfer for the tenant from paying council tax and rent to just paying the same total amount in rent.

Also, if this new tax is to replace council tax  and stamp duty and yet the overall amount collected is about the same as council tax today - then it is not going to pay for Social Care, so hopefully the MP's involved 'do the math' and realise that if they are trying to collect as much tax as they do today to fund local authorities (council tax) and supplement the Treasury (stamp duty) and also enough to properly fund Social Care - then 0.48% is not going to do it and anything higher will push up costs for all those who live in the PRS as well as for all home owners.

Also, the 'based on actual house prices' may make increasing the tax burden easier to sell but the impact on tenants over time would push even more below the breadline.

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Written & oral information and advice from the Portsmouth & District Private Landlord's Association is given in good faith, but no responsibility whatsoever is accepted by the Association or it's officers for the accuracy of it's information & advice nor shall the Association be held responsible for the consequences of reliance upon such information.

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