A new property tax could be on the horizon if Andy Burnham becomes Prime Minister. The Manchester mayor has long advocated for a Land Value Tax (LVT), which would replace stamp duty and council tax. Here is what his proposals entail and how they could impact Londoners.
What is a Land Value Tax?
Burnham supports proposals by the campaign group Fairer Share, which calls for a Proportional Property Tax (PPT). Under this system, stamp duty and council tax would be abolished. Homeowners would pay a flat 0.48% tax on the current value of their property, a rate designed to match current revenue. Renters would not pay the tax, benefiting an estimated 8.7 million tenants. Homeowners would face an initial cap of £1,200 per year, ensuring no one pays more than that initially. Those moving house would no longer pay stamp duty. However, second homeowners, foreign owners, and empty properties would be charged a higher rate of 0.96%.
Why Reform is Needed
Current property taxes are seen as regressive. Council tax is based on 1991 property values, meaning a £350,000 flat and a £10 million mansion often pay the same. Fairer Share claims its plan would benefit 77% of UK households, saving the average household £556 per year. Scrapping stamp duty would remove a barrier to moving and encourage downsizing among older homeowners.
Impact on Londoners
Londoners could face higher bills. Fairer Share estimates the average London homeowner would pay £260 more per year, with the capital contributing an extra £2.5 billion overall. Properties in London and the South East have soared in value since 1991, so owners currently pay proportionally less council tax. In Kensington and Chelsea, where the average home costs £1.273 million, the new tax would be £6,110.40 annually, though capped initially at £1,200. Currently, such homeowners pay about £3,286.88 in council tax. David Fell of Hamptons warns that lower-income homeowners in high-value areas could be hit hard, and renters may face higher costs through increased rents.
Pros and Cons
Supporters argue that removing stamp duty would stimulate the property market and boost economic mobility. However, Tom Bill of Knight Frank points out that annual revaluations turn house price growth into an ongoing tax liability, which could discourage up-sizers, especially in London and the South East. There are also concerns about implementation, such as accurately valuing properties and the impact on landlords and developers. Bill notes that at a time when landlords are exiting the market, further disincentives could reduce rental stock and push up rents. He adds that while taxing assets rather than transactions is sensible, proposals must feel politically neutral to avoid unintended consequences.
