The Treasury is exploring a new tax on home sales above £500,000 as part of a potential overhaul of stamp duty and council tax, according to sources. Chancellor Rachel Reeves has tasked officials with studying a 'proportional' property tax that could replace stamp duty on owner-occupied homes, with a local version eventually replacing council tax.
The proposed national tax would apply only to homes sold for more than £500,000, affecting roughly a fifth of property sales compared to 60% under current stamp duty. The rate would be set by central government and collected by HMRC, but would not apply to second homes. Stamp duty on primary residences raised £11.6bn last financial year, and the new tax is expected to yield similar revenue more consistently.
Officials are drawing on a 2023 report by the Onward think tank, which proposed a dual national and local property tax based on property value. The report's author, Dr Tim Leunig, argued the changes would make moving house cheaper and fairer, noting that under current council tax, a terrace house in Burnley can pay more than a mansion in Kensington.
Any overhaul of council tax would take longer, likely requiring a second Labour term. The government has already signalled steps toward redistribution, such as ending overfunding of affluent inner London councils. The proposals could provide political cover for Reeves, as they target wealth without breaking Labour's pledge not to raise taxes on working people.
