Chancellor Rachel Reeves is considering a new tax on the sale of homes worth more than £500,000 as part of a broader overhaul of stamp duty and council tax, the Guardian has learned. Senior ministers have tasked Treasury officials with studying a new 'proportional' property tax and modelling its impact ahead of the autumn budget.
Officials are initially examining a national property tax to replace stamp duty on owner-occupied homes, with a local property tax potentially replacing council tax in the medium term to repair local authority finances. No final decisions have been made, but a national tax could be implemented during this parliament, while council tax reform would likely require a second Labour term.
The proposals aim to tap into the cumulative rise in house prices, which has entrenched inequalities and made council tax – based on early 1990s values – increasingly unfair. The new tax would apply only to homes sold for more than £500,000, affecting about a fifth of sales, compared with 60% under current stamp duty. The average UK home price was £272,664 in July.
The national tax would be paid by owner-occupiers on sale, with rates set by central government and collected by HMRC. It would not affect second homes. Over time, the new tax is expected to provide a more reliable revenue stream than stamp duty, which raised £11.6bn last year. The Treasury is drawing on a report by the Onward think tank, which proposed a dual national and local proportional property tax.
Dr Tim Leunig, author of the Onward report, said the proposals would make moving house easier and cheaper, and would be fairer: 'It should not be the case that a terrace house in Burnley pays more than a mansion in Kensington.' The government has already signalled steps towards council tax reform, including redistributing funding from affluent inner London councils.
