Bookmark and Share


Rates have been used as a method of local property taxation since the introduction of the Elizabethan Poor Law Act in 1601. This act formally enabled parishes to levy rates on property in order to raise money for the purpose of providing relief to the poor. Rates on property had been levied by parishes for poor relief since before 1601, and the effect of the Poor Law Act was to set up a national system formalising these traditions. The poor law remained in force until the establishment of the welfare state in the twentieth century.  In 1948 the National Assistance Act repealed the poor law and replaced it with the National Assistance Board. The basis of assessment for rates is assumed open market rental values of properties. Occupiers of taxable properties (referred to as hereditaments) were charged rates based on the amount of money that a hypothetical tenant would pay to rent the property assuming that it continued to have its existing use. Rates remained as a form of local taxation until the later decades of the twentieth century when the Conservative government of Margaret Thatcher introduced major changes in the way in which local services were financed.  By that time rates were no longer used to provide for the poor but were collected to pay for local services. Under the Thatcher reforms the rating system of taxation was retained for business premises, but instead of being set by local authorities multipliers were set by central government as a National Non Domestic Rate. In Northern Ireland rates continued to be levied, but in 2007 the assessment of rateable values of domestic properties was changed from rental levels to capital values, that is how much the house would be worth on the open market on January 1st 2005.  Business rates in   Northern Ireland however continue to be based on rental values. The most revolutionary changes took place in England, Scotland and Wales, where rates on domestic properties were completely abolished, and the Community Charge more widely known as the Poll Tax put in its place. The Community Charge was described as Margaret Thatcher’s flagship policy, ("flagship of the Thatcher fleet"), but it was to have an important part in bringing down the Thatcher administration.

Rates were a regressive form of taxation in that the less well off paid a higher percentage of their incomes in the tax than wealthier households had to pay. People in the top income decile paid around 2% - 3% of their incomes in rates whereas those in the bottom decile paid about 13.5%.  Thus the poorest households were paying at least four times as much as a percentage of their incomes as the richest. It was because of the regressivity of the system that the Allen committee in 1965 recommended that rate rebates should be brought in to mitigate the impact of the tax on the poor. Although Rebates had the effect of reducing regressiveness to some extent, the rich still paid less as a proportion of earnings than other income groups. The hardest hit were low income households with earnings that took them above the level of eligibility for rebates.

The domestic taxes that were brought in to replace the rates did nothing to improve the situation. In fact they were even more regressive than the rates had been. At least under the rates the rich paid more on average than the poor because they tended to live in more expensive homes, even though they paid less in comparative terms. The Community Charge was a flat rate tax on all adults set by local authorities. All paid the same regardless of income or the value of their homes.  Rich and poor paid the same amount, a fact which gave rise to the saying "A duke would pay the same as a dustman." The poll tax turned out to be a political disaster and was instrumental in causing the resignation of Margaret Thatcher. It was replaced in 1993 by council tax which again is more regressive than the old domestic rates, and causes considerable financial hardship to those on low incomes. It seems ironic that local taxation which was introduced in Tudor days as a way of providing poor relief had by the end of the twentieth century been transformed into a tax which made the less well off members of society even poorer.   


Council Tax Benefits Charges Rates Bands Exemptions

Copyright (2007)