The UK’s poorest households are allocating an increasing portion of their income to council tax, according to a new study by the Resolution Foundation. The report reveals that the bottom fifth of earners spent 4.8% of their income on council tax in 2020-21, compared to 2.9% in 2002-03, highlighting a widening financial burden on low-income families.
At the same time, the richest fifth of households paid just 1.5% of their income in council tax, underlining the disproportionate impact on the poorest citizens.
The findings have sparked concerns that the tax system is becoming regressive, resembling the controversial poll tax of the 1990s, which was widely criticised for unfairly targeting low-income households.
Poorest households face higher tax burden
The Resolution Foundation report indicates that council tax is now consuming nearly as much of the poorest households’ income as income tax itself.
Lalitha Try, an economist at the think tank, stated that the rising costs have “slowly recreated the issues that undid the poll tax.” She warned that the system is placing increasing pressure on families who are already struggling with living costs.
Council tax rates vary significantly across England, Wales, Scotland, and Northern Ireland, but the overall trend points to an increasing burden on low-income earners.
While wealthier households pay a smaller proportion of their income on council tax, lower-income households are hit harder due to outdated property valuations and limited support schemes that fail to offset the rising costs.
Local authorities granted permission for sharp tax hikes
Amid financial strain on local councils, the government has authorised six English councils to introduce council tax increases of up to 10% from April 2024.
According to Angela Rayner, Secretary of State for Housing, Communities and Local Government, the government had “not taken these decisions lightly” but needed to balance financial stability with taxpayer interests.
Rayner emphasised that the councils allowed to raise their tax rates were those with historically low council tax levels and that residents would still pay less than the national average in some cases.
However, the decision comes as local authorities across the UK struggle with budget deficits, with some councils warning of potential service cuts if funding gaps are not addressed.
The growing cost of council tax for low-income households has reignited debates over the fairness of the system, with critics arguing for reforms to ensure a more equitable distribution of tax responsibilities.
