Homeowners selling properties valued above £500,000 could soon face a new levy, as the Treasury explores a radical redesign of the way housing is taxed.
Chancellor Rachel Reeves has asked officials to draw up options for a “proportional” property tax that could ultimately replace stamp duty and, in time, council tax.
Sources told the Guardian that the first stage under consideration is a national property tax on sales of homes worth more than £500,000, with rates set by central government.
Unlike stamp duty, which currently affects about 60% of transactions, the new charge would hit only around one in five sales, largely concentrated in the South East and other high-value markets.
It has also been suggested that the new tax could be paid by the seller, rather than the buyer.
The tax would apply only to owner-occupied homes, leaving existing stamp duty rules in place for second properties. Rates would be set nationally, with the levy due when the property changes hands.
Officials are also examining whether the system could evolve into a local property tax that replaces council tax entirely, providing fresh revenues for struggling councils. That second stage is seen as a longer-term ambition, likely dependent on Labour winning another term in office.
Simon Gerrard, chairman of Martyn Gerrard Estate Agents, commented: “The existing stamp duty regime is unfit for purpose and has had a chilling effect on the housing market, which is why I’ve long campaigned to reform it. It’s good to see that the government has understood some of the issues and is taking action to end the broken system. Adding further costs to purchasing a home has only reduced transactions, stifled upward mobility and prevented the efficient functioning of the housing market. This new tax would be paid by the seller, rather than the buyer which means that it won’t be the same tax on aspiration that stamp duty currently is.
“However, it’s clear that the government is motivated by a desire to raise revenues and I’m concerned that this new tax is going to be punishingly high. If that’s the case, you’re going to see a ceiling at the £500,000 threshold for that band of the market, as people avoid falling under the regime, and then a significant jump in values with nothing in between. Prices above £500,000 will skyrocket as sellers account for the losses caused by the tax, that used to be paid by the buyer.
“What most worries me is the effect on families in London. The housing market is far higher in London, which means any family home will be impacted by this new tax. If prices surge higher because of this new regime, how will anyone in the capital start a family? The government needs to think very carefully what the wider repercussions these changes might have and act carefully. So far many of its attempts at raising revenues through tax, such as the stamp duty changes earlier this year, have backfired.”
Steph Walker, co-founder of TAUK, added: “Any reform of property taxation should be judged on whether it makes the system simpler and fairer for ordinary buyers and sellers. Stamp duty is widely seen as outdated and a barrier to people moving home, so exploring a more proportionate property tax is a welcome step in the right direction. Above all, the aim should be to make moving as straightforward and accessible as possible for everyone in the market.
"While the detail will be important, it’s encouraging to see the government actively considering change.
"What the market needs most right now is stability, clarity, and a tax system that reflects the reality of housing in 2025 and beyond.”
