The UK should carry out a council tax revaluation and increase charges on higher value properties, the European Commission has said.
This came in guidance on economic issues given annually to each member state government. It carries only advisory status.
The commission urged the UK to regularly update property valuations and to introduce extra charging bands to end the situation where “taxes on higher value property are lower than on lower value property in relative terms”.
Council tax was introduced in 1991. Each property was allocated into bands from A-H, according to its value, with ‘H’ including all homes worth £320,000 and above.
Successive governments have shied away from a revaluation, leaving councils to set taxes based on obsolete property values.
The commission said: “Reforms to the taxation of land and property should be considered to alleviate distortions in the housing market.
“At the moment, increasing property values are not translated into higher property taxes.”
Local government minister Brandon Lewis responded to the commission by calling a revaluation “unnecessary, expensive, and [it] would push up taxes on people’s homes”.
He added: “This Government is funding a five-year council tax freeze that has already delivered a 11% real-terms reduction in bills for hard-working families.”
The commission also called on the UK to increase the supply of new homes, warning: “A shortage of supply has long been a structural phenomenon and is likely to extend into the medium term.
“Action is needed to further boost the supply of houses - by creating appropriate incentives to raise supply at the local level.”