Council tax allows councils to raise funds for local services based on the specific needs and circumstances of each community. Council tax reform refers to changes aimed at making the administration of council tax more reflective of current factors, such as household income and property value. It’s viewed as a way to create a fairer, more progressive system whereby residents can proportionally fund local services.
Following the Scottish Government’s decision to freeze council tax bills from increasing in 2024/25, Local Authorities in Scotland face more financial pressure. Scottish authorities are under strain because the freeze on increasing council tax bills during this time has resulted in an estimated £417 million shortfall, which is leading to challenges in delivering local services.
In this blog, we’ll cover the recent landscape for Local Authority teams in Scotland, what reform could entail, and why future-proofing your council tax collections strategy is more critical than ever to keep collections effective.
Whilst there have been discussions around council tax reform, nothing has been set in stone so far. However, the Scottish Government and the Convention of Scottish Local Authorities (COSLA) have been working on holding public discussions about a potential council tax reform in 2025.
Following these discussions, a few notable problems with council tax in Scotland have been raised, such as:
Despite change, the majority of homes pay unfair rates that don’t reflect current market rates. Both council tax bands in England and Scotland are reflective of valuations carried out in 1991, meaning that these proposed increases would most likely not target the properties that are highly valuable today.
Due to previous council tax freezes and national caps in Scotland, there has been less revenue for local services. Critical local services require stronger funding to support vital local infrastructure.
People living in poverty are less likely to benefit from the council tax freeze compared to those not living in poverty. This has led to calls for reform to ensure fairness when it comes to low-income households and council tax policy in Scotland. A reform will likely benefit a cohort of the population.
In contrast to 2024/2025, council tax charges in Scotland are set to rise by an estimated 9% in the 2025/26 financial year. Given that more than half of households in Scotland receive financial support – either through discounts, reductions or exemptions – Local Authorities will need to continue to provide costly additional support to eligible households, until a well-structured policy of reform is implemented.
On a resident-to-resident basis, other bills may also increase due to a change in the eligibility of support they currently receive. In addition to this, residents will also be charged double if their property is a second home or has been unoccupied or empty for over a year.
Average council tax Band D rates
COSLA’s ‘Council Tax Briefing’ research shows that, after many years of council tax freezes, the average Band D rates in Scotland currently sit significantly below rates paid by households in both England and Wales. Whilst the average Band D rates for Scotland 2025/26 have increased, there is still a noticeable difference to rates in England and Wales in the previous years. |
In Scotland, each council sets rates for their own region, whereas the Scottish Government decides the tax base to which the tax rates apply. But what would this mean following a council tax reform?
It could potentially signal a further shift in power towards Local Government. This means greater levels of investment based on the unique needs of each authority. It could also cause Scotland to work out council tax in a way that is more reflective of the market, enabling the public to better manage their bills and help councils deliver essential services.
Currently, the Scottish Government will be undertaking engagement activity to consult on whether or not they wish to reform the current council tax system. The consultation will take place for 12 weeks, after which it will be taken to Parliament to consider the potential policy changes.
One alternative option proposed for the country would be to increase rates on homes in higher value bands, as this would make council tax less regressive.
The suggestion for increased rates on higher value bands would not accurately account for low-income households living in a higher banded property. This is because property value isn't proportional to ability to pay. Property value is an asset with a market worth that encompasses location, size and condition. A person’s ability to pay, on the other hand, is based on their capacity to afford and maintain that asset.
If council tax reform occurred, extra considerations would be required to:
If reform does occur, it’s clear that more will be expected of Local Authorities when it comes to revenue collection.
While council tax reform may help to introduce parity of contribution to local services, it would also set a higher expectation on the delivery of those services, thus stressing the importance of revenue performance. It also means a higher expectation on services remaining the same and keeping their quality. Council tax supports local capital investment in infrastructure and provides the delivery of sustainable services, which in turn has a positive influence on the community. This is why it’s so important to maintain performance for revenue recovery during times of change.
In essence, if the government reforms the finance system, teams need to ensure they can maintain the funds that their local communities need.
Moving forward, sustainable investment will be key to supporting local services and facilities. Placing importance on resident satisfaction and maximising revenue collection will be a key driver in the months ahead.
In recent years, council tax has become more and more challenging to collect. The current escalation process makes it difficult to take a resident’s individual circumstances into account. With customer service teams stretched for resources and time, how do councils improve collection rates and prevent costly escalations?
This is where Voicescape Collections comes in. Designed specifically for Local Authority Revenues & Benefits, it’s a unique system combining personalised communication, intelligent automation and behavioural science. At Voicescape, we specialise in supporting Local Authority teams with revenue collection.
Get in touch with us today and learn how we can similarly empower your organisation to prepare for upcoming change.