Council Tax Reform Resources 

The banding structure refers to the system of council tax bands into which properties are placed based on their assessed value at the market reference point. Each band is associated with a fixed ratio relative to the Band D charge set by the local authority. Changes to the banding structure may include adding new bands or adjusting how tax rates increase between bands.

Capitalisation is the phenomenon whereby expected future payments associated with an asset are reflected in current asset prices: in this context, the effect of expected future council tax liabilities on current property values. ‘Full capitalisation’ refers to the case where the discounted value of expected future council tax bills is reflected pound-for-pound in lower property values (see below for an explanation of discounting). ‘Partial capitalisation’ refers to the case where the discounted value of future council tax bills is reflected less than pound-for-pound in lower property values.

The Council Tax Reduction scheme provides means-tested financial support to households on low incomes to reduce the amount of council tax they are required to pay. Eligibility and the level of support depend on household income, savings, and circumstances. CTR plays a key role in reducing the regressive impact of council tax on low-income households.

Earnings taper (CTR taper)
The earnings taper is the rate at which Council Tax Reduction is withdrawn as household income rises above the level for full support. Under the current system, CTR is typically reduced by around 20 pence for each additional pound of income a household has above their individually assessed threshold. Reducing the taper means support is withdrawn more slowly, extending help to households just above the CTR threshold

Census-based geographical area covering a set of households containing approximately 500–1000 individuals.

Deferral allows eligible households to delay paying some or all of their council tax liability, typically the increase arising from reform. Deferred amounts are paid later, for example when a property is sold or after a specified period, and may accrue interest. Deferral is intended to support households that are asset-rich but income-poor.

The discount rate is a measure of how much less individuals collectively (through the market) value money received or paid in future, relative to money received or paid today. For example, an annual discount rate of 1% would mean that a given amount of money received or paid in one year would be valued 1% less than the same amount received or paid today. For example, a guaranteed £100 in a year’s time would be worth £99 today. Discount rates have a close relationship with interest rates: interest compensates individuals for the fact that a given cash amount in future is worth less than the same amount today.

Net income is the sum of a household’s income from various sources such as earnings, pensions, benefits, and savings, less the taxes that it pays. Equivalisation involves adjusting household incomes to reflect the fact that larger households require more income to attain the same material living standards as smaller households.

The gross relative tax rate on a property is a measure of how the tax bill for a property compares to that levied on a Band D property in the same council area, prior to any discounts, premiums, exemptions, or means-tested reductions. The gross relative tax rate for a Band D property is 1. Under the current system, and the pure revaluation reform system, the gross relative tax rate varies from 0.667 for a Band A property to 2.45 for a Band H property.

The gross council tax bill is the council tax bill levied on a property before any discounts, premiums, exemptions, or means-tested reductions.

A statistical technique used to estimate the relationship between property values and the property’s location and characteristics (such as size, dwelling type, number of rooms, etc.). The analysis in Revaluation and reform of council tax in Scotland: design considerations and potential impacts - gov.scot uses a log-log hedonic regression specification. This means that the statistical analysis is based on equations where property values and continuous variables (such as size in square metres) are measured in natural logarithms.

Horizontal regressivity refers to situations where households with similar levels of ability to pay are treated differently by the tax system. In the context of council tax, this can arise because properties with the same current market value face different council tax bills, often due to differences in how property values have changed since the 1991 valuation.

Census-based geographical area based on groups of neighbouring data zones (see above), covering a set of households containing approximately 2,500 to 6,000 individuals.

A localised revaluation is a revaluation approach in which properties are valued using national methods, but council tax band thresholds differ by local authority area to reflect local housing markets. Under this approach, properties are placed into bands based on their value relative to other properties in the same council area, rather than against a single national scale.

In Revaluation and reform of council tax in Scotland: design considerations and potential impacts - gov.scot low-income to refers to households in the bottom 40% of the equivalised household income distribution. In terms of income quintiles (fifths), this corresponds to those in the first and second income quintiles. We use middle-income to refer to households in the third and fourth income quintiles. We use high-income to refer to households in the top income quintile (the top 20% of the income distribution).

The market reference point is the date at which property values are assessed for council tax purposes. The current system in Scotland uses values as at 1 April 1991. Revaluation involves updating this reference point to reflect more recent property values.

A national revaluation is a revaluation approach in which all properties are valued based on current market conditions and placed into council tax bands using nationally fixed thresholds that apply uniformly across all local authority areas.

The net council tax bill is the council tax bill levied on a property after any discounts, premiums, exemptions, or means-tested reductions.

A tax is progressive (as opposed to proportional or regressive) if the average tax rate rises with the tax base or with a measure of ability to pay. For example, an income tax is progressive with respect to income if individuals with higher incomes pay a larger share of their income in income tax. In this context, a property tax such as council tax is progressive with respect to property value if the tax is a higher share of property value for higher-value properties; it is progressive with respect to income if it is a higher share of income for higher-income households.

A tax is proportional (as opposed to progressive or regressive) if the average tax rate is constant as the tax base or a measure of ability-to-pay rises. For example, an income tax is proportional to income if individuals with higher incomes pay the same share of their income in income tax as individuals with lower incomes. In this context, a property tax such as council tax is proportional to property value if the tax is the same percentage of property value for high- and low-value properties; it is proportional to income if it takes the same share of income from high- and low-income households.

A tax is regressive (as opposed to progressive or proportional) if the average tax rate falls with the tax base or a measure of ability-to-pay. For example, an income tax is regressive with respect to income if individuals with higher incomes pay a smaller share of their income in income tax. In the context of this report, a property tax such as council tax is regressive with respect to property value if the tax is a lower share of property value for higher-value properties; it is regressive with respect to income if it is a lower share of income for higher-income households.

A reform is described as revenue neutral if it does not increase or decrease the total amount of council tax raised across Scotland as a whole. Under revenue-neutral reforms, some households may pay more and others less, but overall revenue remains broadly unchanged.

Transitional relief limits how much a household’s council tax bill can increase in any single year following reform. It is designed to phase in changes over time, helping households adjust gradually rather than facing large one-off increases.

In the context of council tax, vertical regressivity arises when higher-value properties or higher-income households pay a lower proportion of their property value or income in council tax than lower-value or lower-income households.