The Future Economic Rural Network (FERN) has carefully examined the British Treasury’s proposals to replace stamp duty and council tax with a proportional property tax system. Whilst we recognise the urgent need for reform, we urge the Government to ensure these changes genuinely benefit rural communities rather than inadvertently penalising them further.
Current Rural Tax Injustices Demand Action
Rural Britain faces systematic discrimination under the present property tax regime. Our analysis reveals that rural residents pay £105 more per head in council tax than their urban counterparts, despite earning 15% less and living in properties valued 42% lower. This represents a profound inequity that successive governments have failed to address.
The council tax system, frozen in 1991 valuations, has become increasingly unfair to rural areas. Estate agents involved in those original rural valuations have admitted to significant difficulties, with one stating they “had to do 400 homes a day… in rural areas, often we couldn’t even see properties and just had to do a best guess.” Three decades on, these flawed assessments continue to disadvantage rural households.
Meanwhile, rural councils face an unprecedented funding crisis, with a projected £5.4 billion shortfall by 2030. Rural areas receive 44% less government infrastructure spending per person, forcing local authorities to increase council tax rates simply to maintain basic services.
Regional Impact Analysis
The proposed £500,000 threshold creates markedly different impacts across rural Britain. Southern rural areas, particularly in Surrey, the Cotswolds, and parts of the Home Counties, would see increased tax liability on higher-value properties. Surrey’s rural properties average £473,536, whilst Winchester rural areas average £490,588 – both approaching the critical threshold.
However, this represents a minority of rural Britain. Ninety per cent of Scottish rural properties remain below £500,000, with remote rural areas averaging just £129,000. Similarly, Welsh rural properties average £208,197, whilst Northern England shows County Durham rural properties at £109,980 – the most affordable rural housing nationally.
In the north, for example, in Penrith (Westmorland and Furness area), the 2025/26 Band D council tax bill is approximately £2,420.13 and Band A is around £1,613.41. Higher bands will pay more, with Band H reaching about £4,840.26; however, these remain in the minority. The average property price in Cumbria is £231,000, while the median price is £190,000. This totals 347 properties sold over £500,000 in the last year. These properties would be directly affected by a £500,000 tax threshold, which remains a minority in the county.
| Location | Average House Price (2025) |
|---|---|
| Kensington and Chelsea | £1,415,000 to £1,917,000 (may vary by source) |
| Wigton, Cumbria | £190,000 to £295,000 (typical range for different sources) |
| Council Tax Band | Kensington & Chelsea (2025/26) | Wigton, Cumberland (2025/26) |
|---|---|---|
| A | £1,046.31 | £1,553.10 |
| B | £1,220.69 | £1,811.95 |
| C | £1,395.07 | £2,070.80 |
| D | £1,569.46 | £2,329.65 |
| E | £1,918.23 | £2,847.35 |
| F | £2,267.00 | £3,365.05 |
| G | £2,615.77 | £3,882.75 |
| H | £3,138.92 | £4,659.30 |
FERN believes this geographic variation supports the reforms’ objectives. Most rural households would benefit from reduced tax burden, whilst higher taxes on premium rural properties could help address the second-home speculation that prices out local families in desirable rural areas. As many have already said,
Agricultural Property Concerns
We remain concerned about interactions between these proposals and existing agricultural taxation arrangements. Recent changes to Agricultural Property Relief, affecting 75% of commercial family farms according to NFU estimates, have already created uncertainty for rural businesses. The proposed property tax system must not compound these pressures.
Working farms often benefit from agricultural occupancy conditions that constrain property values below open market rates. The reforms should explicitly recognise these circumstances and ensure agricultural properties receive appropriate treatment under the new system.
FERN calls for clear guidance on how the proposed property tax interacts with agricultural property relief, particularly given the recent inheritance tax changes affecting family farming operations.
Rural Council Funding
The proportional property tax offers significant potential to address rural council funding inequities. Rural areas face unique service delivery challenges – transport costs run 26% higher per capita, social care costs are elevated due to aging populations (25% over 65 versus 15% urban), and infrastructure maintenance spans vast geographic areas.
Revenue redistribution from high-value urban properties to rural areas could provide crucial relief for rural service provision. However, FERN insists on robust protections ensuring no rural council loses funding during transition, with the Rural Services Delivery Grant maintained and expanded to recognise geographic cost differentials.
Housing Market Implications
Rural property markets have outperformed urban markets with 22% price growth versus 17% urban growth over five years. However, this masks an acute affordability crisis with rural house prices averaging 8.8 times earnings versus 7.6 times in urban areas.
Eliminating stamp duty barriers for most rural properties below £500,000 should improve market efficiency and increase transaction frequency. Currently, expensive rural homes sell only every 26-27 years compared to 11 years for lower-value properties – a clear market distortion that the reforms could address.
FERN’s Policy Recommendations
Support Reform with Rural Protections: FERN endorses proportional property tax reform as fundamentally fairer than the current system. However, we demand:
- Rural transition protections including phased implementation and deferral options for asset-rich but cash-poor rural households
- Revenue guarantees ensuring no rural council faces funding reductions during transition
- Agricultural property clarifications ensuring working farms receive appropriate treatment
- Rural impact assessments as standard practice for all future tax policy changes
Strengthen Rural Services Delivery Grant: The current grant recognises only the sparsest rural areas. It should be expanded to acknowledge the higher service delivery costs affecting all rural councils including areas where tourism drives up property prices forcing out local families.
Rural-Proof All Tax Reforms: The evidence demonstrates systematic failure to consider rural implications in tax policy design. FERN champions mandatory “rural-proofing” of major tax reforms as standard practice.
FERN recognises these reforms offer the most significant opportunity in decades to address systematic rural disadvantage in local taxation. The current system’s failure to support rural communities justifies serious reform consideration.
However, success requires careful attention to rural-specific impacts. We cannot support reforms that inadvertently harm family farming operations, rural businesses, or the democratic accountability that rural communities value in local government.
FERN calls on the Treasury to engage meaningfully with rural stakeholders during the consultation process. Rural communities have been overlooked in tax policy for too long. These reforms must deliver genuine benefits for the countryside, not merely redistribute urban tax burdens to rural areas.
The principles underlying these proposals – fairness, efficiency, and revenue adequacy – align with FERN’s mission of supporting rural economic development. But principles alone are insufficient. The implementation must actively protect and promote rural interests.
We stand ready to work constructively with Government to ensure these reforms deliver for rural Britain. Our countryside deserves a tax system that supports rather than penalises rural life, rural business, and rural communities.
About FERN: The Future Economic Rural Network is Europe’s first interdisciplinary rural economic think tank, established in 2019 to support rural communities through technological innovation and alternative business practices. FERN advocates for devolved rural planning powers and multifunctional land use that delivers food, energy, nature recovery, flood prevention, and leisure simultaneously.
