English Mayors Gain New Powers to Set Regional Tax Rates

Prime Minister Andy Burnham has set out plans to give English city-region mayors a direct share of local income tax receipts and business rates, a move presented as a major change to how public money is raised and distributed across the United Kingdom.

Officials said the aim is to reduce how dependent regional authorities are on central government grants, while strengthening incentives for local leaders to grow their economies by letting them keep part of the tax revenues generated in their areas.

How the new revenue model would work

Under the timetable announced, the shift would begin with business rates. The first stage is set to start in April 2027, when regions would retain business rates under the new approach.

A second step would follow in April 2028, when a portion of income tax revenue would be allocated to city-regions. The government has not yet confirmed what percentage of income tax or business rates would be devolved, and said those shares remain under review.

Equalisation and the Treasury timetable

The government also plans an equalisation system designed to support areas with smaller tax bases. Officials indicated the purpose is to limit uneven outcomes where places with weaker economic activity would otherwise raise less from locally retained taxes.

Prime Minister Andy Burnham

The Treasury is expected to complete the detailed fiscal framework ahead of the autumn budget. Until that work is finished, key design questions remain open, including the final split of revenues and how the equalisation mechanism would operate in practice.

Why ministers say it is needed

The policy is framed as part of a broader drive to shift power away from Whitehall to regional strategic authorities. Supporters argue that more predictable local revenue streams could help mayors plan and deliver improvements more directly tied to local priorities.

Proponents say additional locally controlled funding could be used to strengthen transport networks, expand housing delivery, and invest in skills training. The government’s argument is that a closer link between growth and retained revenue would encourage long-term local economic development.

Concerns about uneven outcomes

Critics, however, have warned that devolving tax receipts could widen gaps between prosperous and less prosperous areas if the balancing system does not fully offset differences in local tax capacity.

The government has pointed to equalisation as the safeguard, but acknowledged that specific revenue shares are still being assessed. That leaves uncertainty over how far the reform will change local budgets and whether it will materially reduce funding disparities.

International context on local tax powers

Data cited alongside the plan shows the United Kingdom ranks lowest in the G7 for local tax collection. Only 5.8 percent of national taxes are raised at the local level, a statistic the government is using to justify a shift toward greater fiscal devolution.

For regional leaders and public services, the next milestone will be the Treasury’s autumn budget work, which is expected to determine the rules that will govern the April 2027 and April 2028 transition dates.