UK mayors are about to keep a share of your income tax – what it means for your area
Key Points
- Mayors will keep a share of the income tax and business rates raised in their areas for the first time, so money generated locally stays local.
- Business rates retention starts next spring; the income tax roadmap lands at the Budget.
- Mayors gain control over buses, trams, local rail, planning, 16-19 education funding and employment support.
- Areas without a mayor will get help to set up strategic authorities and take on the same kinds of powers.
- Ministers must now justify why any power should stay in Whitehall rather than move to local leaders.
The government will give English mayors a share of the income tax raised in their areas for the first time, alongside a rising share of business rates from next spring, under plans announced on Thursday (30 July).
Income tax currently flows to the Treasury and returns to local areas as a Whitehall grant. Under the new system, mayors retain a share of it directly, and that share grows as local employers create jobs. The same applies to the business rates paid by shops, warehouses and offices in the area.
Mayors will spend the money on transport, housing and skills without going back to Whitehall for approval.
“Under our plans, more of the taxes raised in a community will stay in that community. Soon, every local leader will have the power and resources to improve public transport, build homes and create jobs,” said Andy Burnham, Prime Minister.
What mayors will control
- Buses and local rail, including integrated ticketing across services.
- Large transport schemes, trams and metros, with Whitehall sign-off stripped out.
- Planning and regeneration powers to build homes and restart stalled development sites.
- 16-19 education funding, so college courses match the jobs local employers advertise.
- Employment support for people out of work.
Mayors begin retaining a greater share of business rates from spring 2027. Chancellor of the Exchequer John Healey will set out the detail on business rates and income tax retention in a roadmap at the Budget.
“For the first time we’re giving Mayors a share of income tax so communities directly benefit when their economy grows,” said Healey.
Areas with no mayor will still get support to establish strategic authorities and take greater control over local priorities. A new “local first” principle requires ministers to justify why any power should remain in Whitehall.
As powers move out of Westminster, the Civil Service will also shrink and focus on responsibilities held at national level.
