A Property Tax For Scotland

Overview —

A replacement for Council Tax based on the actual value of owned land and property.


Andrew MacNish Porter

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Council Tax was introduced in 1993 following the Local Government finance act 1992 as a replacement to the widely derided ‘Poll Tax’. It is a system of property taxation which is levied by local authorities on all domestic properties in Scotland.

Council Tax revenue goes towards funding the public services provided by local authorities. A household’s liability is decided according to a system of bands. Each property falls into one of eight bands, A – H, with band A incurring the lowest tax liability and band H the highest.

Councils choose the band D rate autonomously with the other bands being a fixed proportion of the band D rate. These proportions are set out in law. The band which a property falls into is decided according to its market value in April 1991. New houses built since the introduction of the tax are taxed according to what their value would have been in April 1991, had they been built.

Since its introduction, Council Tax has faced widespread criticism and calls for its replacement from across the political spectrum have grown in recent years. However, despite moderate improvements, these reforms have failed to address fundamental problems of Council Tax. Council Tax therefore remains a deeply flawed tax.


― The Council Tax is widely recognised as being unfair, inefficient and outdated and is in need of replacement. Fortunately, this policy area is fully devolved to Scotland so a replacement to the Council Tax can be implemented without delay.

― There is a strong case for a more effective form of wealth taxation, both to fund local government and reduce inequality. With Council Tax being the largest single tax on wealth, replacing it therefore represents an important opportunity to establish a fairer system of wealth taxation in Scotland.

― Based on five key principles for a good tax system, three options for a replacement tax are assessed: A Local Income Tax, a Land Value Tax and a Property Tax. The fairest, easiest to administer and collect, hardest to avoid and easiest to understand is found to be a Property Tax.

― This report therefore sets out the details of a Property Tax to take the place of the Council Tax. The Property Tax would tax land and any buildings upon that land and would be calculated as a proportion of the total property value.

― The vast majority of properties are valued on the basis of both the land and the building (very few houses are sold separately to the land they are on or attached to), meaning the value of the property can be assessed based on the average value of houses in the surrounding area.

― A ‘house profile’ would be created based on the floor area of a house and data analysis would be used to work out its value based on the sale prices of similar houses in the area. This would create an accurate and annually updated valuation without the requirement for any manual valuation. A small number of properties and large land holdings are more complicated to value, but the report explains how this would be done.

― At a rate revenue-neutral with the Council Tax, the Property Tax would make 60 per cent of households better off and 40 per cent worse off compared to the Council Tax. For most households made worse off, the increase in tax liability would be modest. Only the most valuable houses (those in Band H under the Council Tax) would incur significantly more tax, at an average of £2,300 more per year.

― The tax on land would then raise revenue additional to the that estimated in the revenue neutral calculations. However, since there is still missing data on land values it is not possible to estimate exactly how much that would be.

― It is proposed that the changes are phased in over five years and that a system of exemptions is put in place. This will be particularly important in the case of small farms.

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