A radical overhaul of stamp duty and council tax rules that could hammer Londoners hardest is reportedly being considered by Chancellor Rachel Reeves.
The Treasury is mulling plans for a “proportional property tax” payable by the owners of homes worth more than £500,000 when they sell up, it has been suggested.
This would replace stamp duty, which is paid by house buyers rather than sellers and is seen as impeding the property market. .
Ministers have asked officials to examine the potential of the proposals, sources told the Guardian.
Plans for a local property tax that could replace council tax and help boost struggling local authority coffers are also being explored, the newspaper reported.
This would be paid by home owners based on the value of their homes. No final decision has been made, but it is thought the national tax could help build a model for local levies to replace council tax in the medium term.
Property experts have accused the Chancellor of seeking to “punish people” for buying their own home.
Location, Location, Location presenter Kirstie Allsopp told Times Radio: “Don't fly kites like this. It is really destabilising for the property market and when I say the property market, I mean people's homes.
“And their mortgages and homes affect their relationships, their jobs, their education, their wellbeing in almost every way you can think of.”
She added: “It's the roof over their head. And this Government seems to want to punish people for making the sacrifices they've made to buy their own homes.”
Buyers pay stamp duty under the existing framework, if they purchase property worth more than £125,000.
The new levy would be paid by owner-occupiers on houses worth more than £500,000 when they sell their home, with the amount due determined by the value of the property and a rate set by the Government.
Half of all home sales over £500,000 are in London, with a further 26 per cent in the South East, according to analysis of Land Registry data by property company Hamptons shows.
Londoners also pay on average lower council tax than other parts of the country, with Wandsworth and Westminster boroughs setting the lowest bills in the country.
Businesses and local authorities in the capital have already warned that that planned reforms to the way councils are funded could leave the capital’s town halls hundreds of millions of pounds worse off, risking core services and undermining the the city’s competitiveness.
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.
“Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8 billion and cut borrowing by £3.4 billion.
“We are committed to keeping taxes for working people as low as possible, which is why at last autumn’s budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee national insurance, or VAT.”
Chancellor Rachel Reeves will unveil any changes to the Government’s tax policy at a fiscal event, such as a budget.
The next budget is due in the Autumn.
Former government adviser Tim Leunig has previously suggested replacing stamp duty land tax with a “national proportional property tax” levied on house values greater than £500,000, in a paper published by the think tank Onward.
At a rate of 0.54%, with a 0.278% supplement on values over £1 million, the levy “would raise the same amount as stamp duty”.
Sir Mel Stride, Conservative shadow chancellor, said: “The Conservatives have warned that more taxes are coming and now reports are emerging that the family home is next in the firing line.
“This tax grab would punish families for aspiring to own their own home.
“Under Labour nothing is safe. Your home, your job, your pension – the Chancellor has all of it in her sights.
“Rachel Reeves will tax your future to pay for her failure.”
