The analysis that likened it to the poll tax that contributed to the downfall of Margaret Thatcher was released today.

UK households face a new ‘POLL TAX’ as council tax consumes a large share of household. The analysis that likened it to the poll tax that contributed to the downfall of Margaret Thatcher was released today. The increase has “slowly recreated the issues that undid the poll tax”, the thinktank’s report said.

Thatcher introduced the poll tax, officially known as the community charge, at a flat rate for every adult. Used to fund local government, first in Scotland, then England and Wales, the levy replaced domestic rates, which had forced owners of expensive properties to pay more.

John Major’s government introduced the council tax system in 1993 as a compromise. The think tank’s study reveals the poorest fifth of households spend 4.8 per cent of their gross income on council tax, whilst paying around 5.9 per cent in income tax.

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According to the Resolution Foundation, this amounts to just £300 difference annually between the two taxes for Britain’s poorest families. The findings come from the Foundation’s “Money, Money, Money” report, which examines changes in income sources and expenditure patterns among lower-income households.

The report finds that, compared to a generation ago, households across the poorer half of Britain get a greater share of their income from earnings – rising from 63% in 1994/95 to 68% in 2022/23.

This welcome rise reflects the fact that poorer households are more likely to be in work than they were in the mid-90s; the employment rate for people in these households increased by nine percentage points between 1996/97 and 2022/23.

Lalitha Try, economist at the Resolution Foundation, said: “The incomes of poor households haven’t risen enough in recent decades, as the UK economy has stagnated. But where their money comes from and what it is spent on has changed considerably.

“Two bursts of rapid jobs growth in the late 1990s and 2010s mean that earnings play an ever more important role in shaping lower-income households’ living standards, while social security benefits contribute less.

“Council tax is consuming a larger share of their poor families’ household budgets, who are spending almost as much on these bills as they pay in income tax. This terribly designed tax increasingly resembles the very thing it was meant to replace – the dreaded poll tax.”