Council Tax reform in Scotland

The Council Tax system in Scotland was unfair by design when it was introduced in 1993. It is outdated, regressive and desperately needs reform. Parties’ manifestos for the next Scottish Parliament election must put us on a path to build a credible and fair Council Tax system that lifts people and places out of poverty. With local government budgets facing significant pressure over the Spending Review period, we have reached a tipping point.

Current issues

Since 1993, as well as being grossly unpopular, the current broken council-tax system has had significant adverse impacts on families living in poverty in Scotland. It is:

• a substantial monthly financial pressure for many low-income households, with over 1 in 10 of the lowest-income households behind on their Council Tax bills — too many people face a monthly choice between paying their tax bill, and spending on essentials to protect their health and dignity, including food and heating
• a key barrier to investment in local services that reduce and mitigate the impacts of poverty in our communities — this includes early years childcare, education, housing, employability support, social care and public transport, and gaps in these services disproportionately impact people in poverty who rely on them the most, as seen in our recent report on social care charging
• a tax subsidy for people living in Scotland’s highest-value homes, who pay proportionately substantially less than those in lower-value homes. The Scottish Government’s analysis of the distributional impact of its budget for 2026/27 shows that Council Tax — net of reductions and discounts — has a greater relative impact on households with lower incomes.

Council Tax a key way to reduce poverty

Council Tax reform is therefore a key intervention to reduce poverty and hardship and improve the fairness of our tax system. Bold action is needed urgently to break a 30-year cycle of hoping a problem will just go away. This cycle has sustained a deeply unpopular tax system, protected the interests of the wealthiest in society, and perpetuated poverty and inequality in Scotland.

There is widespread consensus that the current system is fundamentally not fit for purpose, as set out in JRF-funded analysis in 2025 from the UK Collaborative Centre for Housing Evidence. Bills are still based on valuations from 1991, which capped the highest bills for Band H homes at 3 times the liability for Band A homes, despite being worth nearly 8 times more in 1991. Unfairness has compounded over time as property values have increased at different rates, with the highest-value homes seeing greater increases in value compared to lower-value homes.

Following tweaks to the system in 2017, homes in Band H in Scotland still only pay 3.675 times the bill as homes in Band A. There are also shocking regional disparities, with very different tax liabilities for houses with the same value in different parts of the country. Evidence suggests that over half of Scotland’s homes are now in the ‘wrong’ band.

The 2026/27 Scottish Budget’s plans to revalue properties worth over £1 million and introduce 2 new high-value property bands from 1 April 2028 are positive steps, but this cannot be the limit of our ambitions. To date, despite relatively modest changes in 2017, the Scottish Government, under different administrations, has made the decision to preserve the retrograde status quo in every year since the re-establishment of the Scottish Parliament in 1999. Council Tax freezes have been more likely to benefit households with higher incomes.

Things like this perhaps explain why, in recent polling for JRF, over half of people in Scotland agree that politicians prioritise the concerns of better-off people within society. Action is needed urgently to restore trust that our political system can deliver a fairer society.

A recent Scottish Government consultation set out a viable way forward to change the system for the better. We now need to see words turn into action, with cross-party commitment.

Recommendations

While there are a range of expert views about the optimal alternative Council Tax system, our priority is to see change delivered, and we are pragmatic about the specific model. A lack of perfect consensus is not a reasonable excuse for inaction. Politicians should not seek consensus only when it suits stasis. It is an excuse that allows politicians to duck a difficult conversation about housing wealth and inequality with the most affluent people in Scotland. We are focussed on outcomes that will contribute to reducing poverty in Scotland.

To this end, these are our recommendations:

• We strongly favour the most progressive proposals set out in the Scottish Government’s recent consultation, which would reduce bills substantially for households in low-value homes, and ensure that households with the greatest housing wealth pay a fairer share. We would ideally like the next Scottish Government to go further and implement a genuinely proportionate property tax, which would be a fairer and clearer basis for reform.
• We also support robust mitigations to ensure that people living in poverty are protected from significant bill increases as a result of reform, especially through expanding the Council Tax reduction scheme to cover bills for more households. The level of Council Tax currently paid by those with least, some of whom simply cannot pay, is a false economy which is directly causing hardship. This needs to change as part of, and ideally ahead of, wider reforms to Council Tax.
• Under a reformed system, we would also ultimately like to see Council Tax generate more revenue for council-run services that support people out of poverty. An overall increase in property tax is justified given the level of, and inequality in, housing wealth in Scotland.
• We think that radical change is needed urgently, but we would also support incremental first steps that lay critical foundations for reform, such as a comprehensive revaluation to bring the system up to date with current housing values. A regular timeline for revaluation, set early in each parliament to ensure distance from electoral cycles, should be underpinned by binding legislation.
• We think that any Council Tax reform should have a core aim to ensure that local authorities have more control over revenue raising and budget setting for their communities, with adequate resources and stronger fiscal levers to improve the services that voters rightly hold them accountable for. Council Tax is a key mechanism to achieve this aim, but it will also require a broader reckoning on reform of local government finance in Scotland. Getting this right has the potential to catalyse councils’ action to reduce poverty, make our vital public services more sustainable, boost living standards, and improve voters’ confidence in local democracy. It can also create the conditions to ensure that people with lived experience of poverty can genuinely influence decision-making in their communities, as seen so powerfully in the work of Dundee Fighting for Fairness.

To ensure that Council Tax reform does not stall, we would also like to see the next Scottish Government lead extensive, rapid engagement to increase the public’s understanding of the current Council Tax system, and actively build consensus for change. It is encouraging that, at a two-day Citizens’ Panel in Glasgow in June 2024, funded by the Joseph Rowntree Foundation, the representative panel reached a clear majority in favour of reform.

A larger-scale Citizens’ Assembly could be an effective mechanism to dispel myths about the public acceptability of change, but full consensus should not be a prerequisite for reform. Political leadership and courage are needed to set the tone and terms of the debate, and represent the interests of people who would pay fairer, lower bills in a reformed system.

Conclusion

For the next Scottish Government, meeting its legally-binding, cross-party child poverty targets by 2030/31 will require bold action at scale. Every lever available must be pulled to improve the lives and life chances of Scotland’s children. A fair tax on housing wealth has the potential to cut through the budget constraints that limit investment in radical solutions to poverty, at a local and national level. The next Scottish Government must prioritise Council Tax reform to create the fiscal foundations for a fairer Scotland.

We urge the Scottish Government and all parties standing in this year’s Scottish Parliament election to commit to act on the responses to the recent consultation, and bring forward substantive legislative change.