Wickham's musings from Chalke

The proposal to fund most or all of Council Tax by income tax is probably a good idea in principle. Pensioners are finding the increases in Council Tax far higher than the increases in their pensions and they are often the poorer section of the community.

However, how would it work? At present the Council Tax is levied on property values. These do not change much except for a few new properties coming into the equation and a very few being revalued. Consequently the Council knows the total property value fairly precisely and when setting a rate can predict the revenue with a fair degree of accuracy, apart from non-payers.

If the tax is to be an income tax most people will have an income adjustment during the year and people will leave or enter the Council area, so how will the council be able to predict its revenue?

One answer would be to fix the date at say April 5th if it is considered appropriate to tie it in with tax returns. Each person would therefore pay Council Tax based on their tax return and their residence at the time, even if they moved to a different Council area on April 6th. There would still be difficulties though as it takes months for the Inland Revenue to work out the tax payable and most people only pay tax at six monthly intervals on account, some not paying the full amount for years. So the ability of a Council to set a rate might have to be on a person’s tax return for the previous year, making it always out of date regarding income and address.