Anticipated council tax rises will have little impact on wealthy homeowners in the richest areas of London while increasing the tax burden on those in other areas.
The top 10 areas where council tax bills are largest, in proportion to living costs, are in the North, according to research by property website Rightmove.
Meanwhile all of the areas where council tax is cheapest in proportion to annual property outgoings are in the South – and the majority of these are in London.
In Hartlepool, County Durham, council tax bills on Band D properties are £2,099 – equivalent to a third of average annual rent or mortgage bills.
But in the London borough of Westminster, where tenants pay rent bills that are eight times as high, the annual council tax bill was just £829. This is equivalent to just 2pc of average local rents – or 1pc of local mortgage bills.
Areas where council tax is already considered unaffordable will be hit hardest by anticipated increases to council tax. In the small print of his autumn Budget, Chancellor Rishi Sunak said local authorities could raise council tax by 2pc without a referendum, plus an additional 1pc to cover social care.
It is clear that local authorities need more cash. Analysis by the Institute for Fiscal Studies, a think tank, said council tax bills would need to rise by at least 3.6pc each year for local services to be maintained at current levels. But this could easily be 5pc per year, the IFS said.
The funding gap could be even higher. Charity Age UK put the necessary council tax increase at 10pc in 2022.
The areas with the highest council tax bills are Nottingham, Dorset and Rutland, where the respective annual Band D bills are £2,226, £2,223, and £2,195.
People living in the London boroughs of Westminster, Wandsworth and the City of London, however, pay £829, £845 and £1,049.
A 5pc rise in council tax would therefore cost a homeowner in Nottingham £111 per year. This is 170pc more than the £41 increase in costs for residents in Westminster.
Tim Bannister, of Rightmove, said the stark differences in council tax could start to influence the wider housing market.
“Further increases could mean home-hunters start to consider council tax costs much more as a factor when they’re choosing a location to move to, especially in those areas where the cost is more than, or close to, a third on top of the costs of their rent or mortgage,” said Mr Bannister.
In Middlesbrough, annual Band D council tax is equivalent to 34pc of annual mortgage payments. In Burnley, Blackpool and Hyndburn, the respective shares were 32pc, 31pc, and 31pc.
By contrast, in Kensington and Chelsea, one of London’s wealthiest postcodes, annual council tax was just 2pc of annual mortgage payments.Internet Explorer Channel Network