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How a Proportional Property Tax could ease the effects of the cost-of-living crisis

2022 will be remembered as the ‘year of the squeeze’ for millions across the country –  fairer property taxes would help, says Andrew Dixon, Founder and Chairman of Fairer Share.

Devastatingly, a triple threat of a cost-of-living crisis, higher interest rates and the removing of Covid-19 support schemes is going to hit lower and middle-income households the hardest. But the final nail in the coffin is our deeply unfair property tax system which has severe ramifications for households that are suffering the most.

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North-south divide

Unfair Council Tax rates means many people are already paying higher taxes for properties worth far less. For example, those living in Westminster pay just 0.06% council tax as proportion of property value, compared to 1.13% in Hartlepool or 1.17% in Nottingham North.

The recent pandemic and spiralling utility bills have exacerbated the problem even further. The Office for Budget Responsibility expects Council Tax bills to be 33% higher by 2026/2027 due to increased social care pressures. This is equivalent to around £435 extra per household. This is on top of thousands who are already unable to pay their Council Tax bill, leading to around £4.4 billion worth of existing debt.

It’s vital that we look to create a fairer, more transparent system which puts money back into the pockets of hard-working people. To stop the rise in Council Tax bills for millions of households who will be disproportionately impacted by the cost-of-living crisis. Now is the time for the Government to abolish Council Tax and Stamp Duty Land Tax (SDLT) altogether and consider introducing a Proportional Property Tax (PPT).

Property tax reform

The Fairer Share campaigns for the introduction of a PPT where all households pay a flat 0.48% of their property value, abolishing Stamp Duty and Council Tax for good. In addition, the obligation to pay the PPT moves from tenants to owners. The benefits are considerable – moving to this system would see tax savings for over 19 million households with an average saving of £435 every year. In addition to a 0.48% annual charge for all homes, there would be a surcharge on second, foreign-owned and empty homes that Fairer Share research suggests could raise an additional £4.5 billion.

A PPT would also be a fairer deal for younger generations who are confronted with an economic barrier unlike previous generations. Over 90% of people aged 25–34 would better off, as well as 85% of single working adults. On top of this, 98% of households in the most deprived constituencies would enjoy a tax cut.

Overall, a PPT would aid the country in rebuilding after Covid, would be a fairer system and would support the households that really need it. Covid-19 has already hit the poorest households hardest, the Government must now be committed to supporting them as prices, bills and other taxes continue to rise.

Not only is it fairer, but it also makes sense economically. Just recently, the IPPR think tank calculated that by removing Stamp Duty and facilitating more property sales, and by putting more money in the pockets of low-and middle-income households, reform could result in an increase in GDP of over £3 billion per year. A PPT will result in a tax cut for millions of households outside London, while demanding fairer contributions from the bankers, large landowners, and foreign investors in London and the South East who benefit the most from rocketing land values and will not be plunged into poverty as a result of rising costs.

A Proportional Property Tax has already been backed by think tanks across the political spectrum, and the House of Commons Housing and Local Government Committee called for it to be considered by the Government last year. As household costs continue to rise and the Government is running out of options to support those hardest hit, there is a overwhelming case for reforming outdated and unjust property taxes.

About Andrew

Starting his career in finance at Société Générale and Goldman Sachs, Andrew has spent over two decades investing in small and medium-sized businesses. Through ARC InterCapital, he has invested £20 million in over 40 British companies and his current portfolio employs more than 1,500 people. In 2020 Andrew founded Fairer Share to help reform England’s property tax system.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.

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