Rachel Reeves is considering replacing stamp duty with a new property tax on homes worth more than £500,000. Treasury officials have been tasked with studying how a "proportional" property tax system could be implemented as part of a broader shake-up of property taxation.
The new national tax would be paid by owner-occupiers when they sell their homes, rather than buyers paying stamp duty. The amount would be determined by property value, with rates set by central government.
Reduced market impact
The Guardian reports the new system would affect only 20% of property sales, compared to 60% currently impacted by stamp duty. The proposals come amid pressure from Deputy Prime Minister Angela Rayner for more wealth-based taxation, according to The Guardian.
Officials are also exploring whether a local property tax could replace council tax in the medium term. Such changes would likely require a second Labour term to implement fully.
Expert backing for reforms
Tim Leunig, who worked as a government adviser for more than a decade, said: "These proposals would make it easier and cheaper to move house, for a better job, or to be near family, as well as being fairer."
He added: "It should not be the case that a terrace house in Burnley pays more than a mansion in Kensington - and it wouldn't be under these proposals."
Government response
A Treasury spokesperson said: "As set out in the plan for change, the best way to strengthen public finances is by growing the economy - which is our focus."
The spokesperson emphasised the government remains "committed to keeping taxes for working people as low as possible" and highlighted recent planning reforms expected to grow the economy by £6.8bn.
Current system details
Stamp duty currently must be paid within 14 days of completing a property purchase, typically arranged through solicitors. The Guardian reports stamp duty raised £11.6bn last financial year, with the new system expected to raise similar amounts more reliably.
The tax depends on property value, first-time buyer status, and whether the purchase is a main home or second property.
Sources used: "Birmingham Mail", "The Guardian" Note: This article has been edited with the help of Artificial Intelligence.
