Another day, another idea that Rachel Reeves is said to be considering. It’s as if the chancellor is putting suggestions out there to see what sticks. Either that, or she just wants to be seen to be busy and to let it be known she has considered all options before delivering her autumn Budget, which is when we will discover for certain.
What is clear is that Reeves has a funding gap to fill, and the backdrop – of stretched national and local public services and a flatlining economy – isn’t pretty. Nor too is a regime of anachronistic, complex and often unfair taxes, especially regarding homes.
The latest possibility for dissection and reaction, then, is a new property tax to replace stamp duty and council tax. First up would be an annual tax to replace stamp duty on homes worth more than £500,000, to be paid by owner-occupiers. The amount charged would be based on the value of the property according to a rate set by the government; HMRC would collect payment. The annual levy would not apply to second homes because they would still be subject to stamp duty, including the 5 per cent second home surcharge.
The aim of this new national property tax would be the creation of a revenue source that is more reliable and not so prone to fluctuations in the housing market as stamp duty. It would be more efficient and practical, reflective of a current Britain (stamp duty, the oldest of all taxes, was born in 1694) and, crucially, would not be such a drag on home sales. Properties in the bracket below £500,000, upwards of £250,000, would be freed. Given that the average price of a home in the UK was £272,664 according to Nationwide, most homes would be liberated, including starter homes. It would prove easier and cheaper to move house and encourage greater mobility.
Inevitably, the new tax will, and is, already being criticised as another “wealth tax”. Quickest out of the traps was Location, Location, Location presenter Kirstie Allsopp, who decried the suggestion of a property tax as “really destabilising for the property market – and when I say the property market, I mean people’s homes. This government seems to want to punish people for making the sacrifices they’ve made to buy their own homes.”
Reeves and her advisers are letting it be known that they are following a report from the centre-right (so not leftist) think tank, Onward. It was Onward that came up with the £250,000-to-£500,000 net. Under the Onward plan, the suggested annual rate above £500,000 would be 0.54 per cent, and a home worth more than £1m would pay 0.81 per cent on the portion over that limit.
Important, given the state of the nation’s finances, is the possibility will not actually raise more than stamp duty. Onward’s recommendation that it should not be retrospective would mean that stamp duty would not be scrapped in one go, the substitute being phased in gradually. So, it is no fiscal panacea, rather a nice thing to have.
Onward also recommended ditching council tax, also loathed by left and right, and introducing a local proportional property tax. It would be charged yearly to homeowners, not residents, on properties up to £500,000. Like council tax, the rate would be set by local authorities, but Onward’s guide of 0.44 per cent would mean a maximum bill of £2,196 a year, payable to the council. With properties worth more than £500,000, the government will step in and take an additional 0.54 per cent, also annually, on the portion above £500,000.
If Rachel Reeves adopts @timleunig’s property tax to replace council tax and stamp duty, she should be praised to the skies https://t.co/VyzGt43b0W
— John Rentoul (@JohnRentoul) August 19, 2025
Out would go the outdated and flawed council tax banding system, assessed on property values from 1991. It would be fairer and would allow councils to retain a strong lever over their own finances. It could head off some of the council bankruptcies that are brewing. Unfortunately, though, it too is unlikely to prove a quick fix – experts are predicting it will take a while to implement. A test for Reeves and Keir Starmer would be, given their talk of wanting to go “further and faster” and their commitment to removing bureaucracy, just how soon any of these changes could come on-stream.
The new local tax is also not especially redistributive – poor areas would still remain disadvantaged, affluent ones would still be able to bask in their good fortune.
The new, national and local property tax would enjoy another advantage, in that Britain would operate under one structure. At present, stamp duty exists in England and Northern Ireland – Wales and Scotland do it their way. This would cut across, and while it might not be popular with nationalists, it would be uniform.
Above all, what is under discussion, if it is Onward, bearing in mind that other think tanks have their own ideas, is more appealing than the current mess. It is true that it is not hard – that anything would be better, but this does begin to feel like genuine reform and modernisation.
