Unless you’re prepared to sell up and move to a smaller home – the only way to realise your house price gains – you’ll have to find extra cash.Some groups are particularly hard hit. The incomes of pensioners, for example, rise in line with prices each year, rather than earnings which tend to increase more quickly. Homes in the North-east and the South-west are more likely to move up. This research once again exposes the fundamental flaw that makes council tax so unfair. The disposable incomes of people in the North-east have not risen at a faster rate than those of their friends in the North-west over the past 15 years.

Yet they face tax increases, while bills will fall elsewhere.The trouble with council tax is your bill is not in any way based on your ability to pay. If you live in a property that has done particularly well from house price inflation, you’ll lose out, whether you’re a City slicker or a cash-strapped single mum. The government won’t announce how it will calculate the re-bandings until early next year. But Halifax’s research suggests homeowners in the North-west and the West Midlands, where house price inflation has been lower, are more likely to move into a lower tax band. Since more local authorities in England have recorded house price inflation below the average figure than above, the re-banding process should produce more winners than losers.
Don’t start spending your savings just yet.

The bank is assuming the government will raise the value of each band by 186 per cent, the amount by which house prices have increased since council tax replaced the poll tax in 1991. Your council tax bill is more likely to fall than it is to rise in April 2007, when the government completes its re-banding of every property in England. Research from Halifax Bank shows more homes will move down a council tax band in two years’ time than up. Here’s some welcome news you may not have been expecting. A recent National Audit Office report found more than 500,000 tax returns were incorrectly processed in 2003-04 – as a result, one group of taxpayers was overcharged by £50m.Harrison said: “Taxpayers expect their returns will be processed accurately, but this is clearly not the case.”. HM Customs & Revenue charged £13m in penalties between October 2003 and October 2004 alone.However, Jeff Harrison, a tax executive at solicitors Barr Ellison, warned taxpayers to check their bills very carefully. “In July 2004 there were over 260,000 people in this position – after 31 July, a further £100 penalty clocks up and the taxman can charge £60 a day.”The latter measure is rarely used, but revenue from penalties has risen sharply in recent years.

In particular, it is to target those who persistently fail to file tax returns.”Individuals who failed to meet the deadline in January 2005 will already have a penalty of £100,” he warned. A 5 per cent surcharge is then added each January to tax bills that remain unsettled for a year or more – a second charge is payable if the bill hasn’t been paid by the end of July.David Kilshaw, a tax partner at accountant KPMG, warned HM Customs & Revenue was set to get tough on taxpayers failing to meet deadlines. “Many taxpayers do not appear to realise there are fines and penalties,” he added.In addition to a £100 fine for anyone who misses the 31 January deadline for filing their tax return, interest is charged on outstanding tax at 7.5 per cent a year. The self assessment tax system covers around 9 million taxpayers, many of whom must make their second payment on account for the latest financial year by the end of the month.
However, Geraint Jones, a senior tax adviser at Blick Rothenberg, warned: “Consumer debt is at an all time high and we suspect many people have put off paying.”Jones said HM Customs & Revenue was unsympathetic towards taxpayers who missed self assessment deadlines. It warned many taxpayers faced fines and interest payments because they did not have spare cash to meet their bills on 31 July. Thousands of taxpayers who must pay their latest income tax bill by next weekend may be struggling to meet the deadline according to accountants at Blick Rothenberg.