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Rack rent
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The Rack rent is the full annual rental which a property could achieve were it to be let out to rent.
This contrasts with a ground rent , which may be only a nominal sum taking into account the capital amount which has been paid to purchase a lease on the property.
Rack rents were originally used as the basis of the calculation of rates (local taxes) and rateable value. This system of local taxation was replaced first by the Community Charge (poll tax) and then in 1993 by the Council Tax.
Instead of estimating the property value for tax on a nominal figure arrived at through a calculation based on rack-rent, Council Tax is linked to the estimated market value of the property (originally as at April 1, 1991).
See Also: Mortgage Centre and Mortgage comparison Service for the latest facts and figures.
Last Updated: May 2007 © Moneyextra.com
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