Revaluing Fairness - Reforming Council Tax in Scotland - Scottish Government New Paper Looks At Potential Changes

28th October 2025

Scotland's council tax system has long been criticised as outdated, inequitable, and distorted. The recently published report "Revaluation and Reform of Council Tax in Scotland: design considerations and potential impacts" published on 27 October 2025 offers a thoughtful analysis of how to rework the system.

The Scottish Government and the Convention of Scottish Local Authorities (COSLA) are seeking your views on the future of council tax in Scotland.

Council tax is a vital source of funding for local services such as schools, social care, roads, libraries and waste collection. The council tax system has remained largely unchanged since its introduction over 30 years ago.
Link at bottom of this page.

Why reform council tax?
At present, council tax assigns properties to one of eight bands (A through H) based on estimated values in April 1991.

Some properties that appreciate massively over time remain in a lower band, paying too little relative to their value;

Two homes with very similar current values might fall into different bands (if one crossed a band threshold in 1991), causing very different tax bills;

The banded system results in "cliffs" at thresholds: a small change in property value can mean a large jump in tax liability.

The tax structure is regressive with respect to property value: higher-value homes pay disproportionately less tax relative to their value than lower value ones.

Moreover, many discounts, exemptions, and special rules further distort behaviour and create inequalities (e.g. the "single person discount" disproportionately benefits people in higher bands, and contributes to under-occupation of housing).

Because of all this, many see reform as long overdue: the current system is "ripe for revaluation."

The report is a contribution to shaping how that reform could be designed — before any legislative changes are made.

What reform options are considered?

The authors explore five illustrative reform options, all built on the foundation of updating property values (i.e. revaluation).

Pure revaluation, maintaining the existing 8-band structure but reassigning properties into bands based on up-to-date values (so that the same share of properties are in each band as today, but bands shift).

12-band "more differentiated" system: more fine gradations allow smaller gaps between bands and smoother transitions.

12-band less regressive: same number of bands but with tax multipliers adjusted to reduce regressivity (i.e. make tax burdens more proportional to value).

14-band less regressive: more bands + further tweaks to reduce regressivity.

Continuous proportional system: tax is directly proportional to the up-to-date property value (no bands). This is used as a benchmark of a "clean" alternative.

These options differ in how steeply tax liability scales with property value, how many "jumps" there are, and how redistributive they are.

In modelling the impacts, the authors assume that:

The total revenue raised via council tax remains the same (i.e. revenue-neutral) across Scotland;

Grant funding from Scottish Government to local councils would be redistributed in line with changes in tax bases (so that no council is unfairly advantaged/disadvantaged simply because property values evolved differently).

These assumptions ensure that reform is judged on redistribution within and across council areas, without changing aggregate spending.

Who wins, who loses? Modelled impacts

Because of its design, any meaningful reform will produce both winners and losers — some households will see reduced bills, others will see increases. The distribution of those effects is crucial to acceptability and fairness.

Net changes for households

Under a pure revaluation, 59% of households would see changes in net council tax under £50 per year — i.e. modest shifts.

Many households (especially low-income ones) currently have their tax partially or fully covered by the Council Tax Reduction Scheme (CTRS); thus even if their gross liability changes, their net change may be small or zero.

Roughly symmetrical numbers of households would see increases or decreases: about 11% would see a cut of over £200/year, and 11% would see an increase of over £200 (in the pure revaluation scenario).

In a less regressive reform (e.g. 12-band less regressive), lower- and middle-income households tend to gain (i.e. pay less) on average, while higher-value households would see larger increases.

For example, one illustrative scenario found that the poorest four-fifths (i.e. 80%) of households would see average reductions of ~£56/year, whereas the top 20% would on average see increases of ~£227.

Impacts on property values and capitalisation

An important feedback arises: changes in council tax are capitalised into property values. If a property sees its annual tax reduced, that benefit tends to raise its sale value, and vice versa.

Because of this, the initial owners of properties at the moment of reform (not necessarily the future occupiers) tend to gain or lose from reform. A household moving in later only faces the new tax regime; they don't "capture" the discount or loss in value that reform imposes or grants.

Thus, equity across time and between movers vs existing owners is an important consideration.

Practical challenges and policy design choices

Even if there is broad agreement that reform is needed, how it is implemented is fraught with trade-offs. The report (and commentary) highlight several crucial design and implementation questions.

Transitional arrangements & smoothing

One obstacle to reform is that large bill changes, especially sudden ones, can be politically unpalatable or financially difficult for households. Options to ease the transition include:

Phasing in changes over several years, gradually moving households toward their new liability.

Transitional relief or caps (e.g. limiting how much any bill can rise per year).

Deferral schemes for "asset-rich but cash-poor" households, allowing them to defer part of their tax until property sale or death, possibly with interest. Similar schemes exist elsewhere (e.g. Ireland, British Columbia).
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One of the biggest structural fixes would be to legislate regular revaluations (e.g. every 3-5 years) so that valuations stay reasonably up to date. That would reduce the risk of the system becoming stale again in a few decades. The Welsh reform is held up as a model: in Wales, a new valuation is scheduled for 2028, with regular revaluations every 5 years (unless changed).

With advances in computing and modelling, the administrative cost of frequent revaluations is lower than in past decades.

Grant redistribution & local authority impacts

Because changes in the tax base differ across councils (some areas' property values may have appreciated more than others since 1991), the redistribution of Scottish Government grants to local councils must be recalibrated. If not, more redistribution would occur between councils, potentially penalising those whose tax base declines under reform.

Dealing with discounts, exemptions, and distortionary rules

Part of reform would involve revisiting rules such as:

Single person discount
Current design gives more benefit in dollar terms to higher-band properties, encouraging single occupants in large homes and contributing to under-occupation. Reform could make discounts less dependent on property band.

Second-home premiums, empty home discounts, and other local variances: these could be adjusted to reduce distortions and encourage more effective use of housing stock.

Political and public acceptability

Past reform attempts have met resistance: in 2023 the Scottish Government consulted on making the system less regressive, but only 4% of respondents supported the proposed changes (although many respondents were in higher bands).

Thus, any reform must come with clear communication, transitional mitigation, and perhaps phased implementation to build public support.

Implications and reflections

The "Revaluation and Reform" report makes a persuasive case that Scotland's council tax is overdue for structural change. Its current reliance on 1991 property values, banding quirks, and regressive multipliers all contribute to unfairness and distortion.

Revaluation is a necessary first step — even keeping the 8-band structure, updating valuations would correct many anomalies and misplaced tax burdens.

The choice of how to adjust multipliers, band widths, and whether to move toward proportional taxation determines how redistributive (or regressive) the new system is.

Redistribution of grant funding is essential to prevent unintended winners or losers at the council level.

Transitional safeguards (caps, phasing, deferrals) are likely needed to prevent undue hardship or political backlash.

Regular revaluations must be baked into the design to avoid future stagnation.

From a practical perspective, this is a moment of opportunity. The Scottish Government has launched a consultation on the Future of Council Tax (inviting views on how to make the system fairer and more up to date) and the report can feed into that process. But the real test will be navigating the political economy of reform and how to balance revenue neutrality, fairness, and acceptability.

Read the full report HERE

Future of council tax in Scotland: consultation
You can contribute to the consultation HERE
87 days to respond
Respond online
Closes 23 January 2026