Rumours of property tax spark backlash ahead of Autumn Budget

Rumours of replacing stamp duty with a property tax on homes worth more than £500,000 have sparked fury among property experts.

The Guardian reports ahead of the Autumn Budget, Chancellor Rachel Reeves has tasked officials to “study how a new ‘proportional’ property tax could be implemented and model its impact before reporting back to ministers.”

The tax would be paid by owner-occupiers on properties valued over £500,000, which The Telegraph says would disproportionately affect homeowners in London and the South East.

Tax would not replace stamp duty on second homes

According to The Guardian, the amount paid would be determined by the property’s value, with the rate set by central government and collected directly via HMRC.

However, the tax would not replace stamp duty on second homes.

Analysis of Land Registry data by Hamptons, cited by The Telegraph, shows that half of English home sales over £500,000 currently occur in London, with another 26% in the South East.

The Guardian reports that the proposals would affect around a fifth of property sales, compared with roughly 60% under current stamp duty levels.

Property industry reaction

The Conservatives and property experts have hit out at the Chancellor’s plans, warning of unintended consequences for the property market.

Sir Mel Stride, the Tory Shadow Chancellor told the Telegraph: “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.”

Craig Fish, of London-based Lodestone Mortgages, told the Daily Mail: “As usual Rachel Reeves is only thinking about how to earn a quick buck.

“The long-term consequences could be far worse. It’s likely that the major downside is it would stop people selling or moving, especially in high-value areas, namely the south. The result is less income overall.”

Colleen Babcock, Rightmove’s property expert, said: “Stamp duty is a huge barrier to movement, from first-time buyers to downsizers. We recently called for an increase to the zero rate thresholds at which first-time buyers and home-movers start paying stamp duty, and backed a suggestion from one of our agent partners that stamp duty should be paid over a longer time period.

“If changes are brought in that make home-moving genuinely more affordable for people then we would welcome them, but without firm details it remains to be seen if a different type of taxation would leave property owners better or worse off in the long run.”

Timothy Douglas, head of policy and campaigns at Propertymark, said: “Discussions around reforming Stamp Duty are welcome because it is a significant barrier to moving and getting people on the housing ladder. What’s key is that any reforms are evidence-based and support first-time buyers, second steppers and those looking to right-size.

“Economic growth can come from reducing the financial burden of Stamp Duty, which we know increases the number of transactions, but any changes must work alongside differing property prices and the dynamic nature of our housing markets across the country.”

It’s definitely not happening

The Treasury has denied rumours of a new property tax ahead of the Autumn Budget, with one source telling The Telegraph: “It’s definitely not happening.”

However, reports suggest the Treasury is exploring whether a local property tax could eventually replace council tax, aiming to support local authority finances.

While a national tax could be implemented during this parliament, a full overhaul of the council tax system is expected to take longer.