Chancellor Rachel Reeves is considering scrapping stamp duty and replacing it with a new property tax as part of major reforms to the housing tax system in the UK.
The Treasury is exploring changes ahead of the Autumn Budget, with proposals also including an overhaul of council tax. The reforms are at an early stage, and no decisions have been finalised.
Under new plans being examined, stamp duty could be replaced with a proportional property tax, applied when homes worth more than £500,000 are being sold.
Unlike the existing duty, which is paid by buyers, the new levy would be paid by the sellers. Around one in five transactions will be affected, compared with about 60 per cent under the current system.
Reeves is also looking at replacing council tax with a local property tax, calculated on up-to-date valuations rather than outdated 1990s bands. The aim from is to provide councils with more reliable funding and reduce inequalities in the system for all.
The chancellor has pledged to modernise Britian’s tax system, describing stamp duty and current council tax measures as “regressive” and “distortive”. The Treasury estimates stamp duty raised £11.6 billion last year, with revenue ministers stating any replacements must match or better this figure.
Economist, Tim Leunig, a former advisor to Rishi Sunak, has previously called both taxes “unfair and unpopular”. Think Tank, Onward, has also pressed for proportional levies, arguing they would improve fairness while allowing greater mobility in the housing market.
Reform of council tax could prove more complex, with officials suggesting it may require Labour to win a second term to carry it out in full. Opposition parties have not yet set out their positions, but council leaders have long complained about the unfairness of the current system.
The government is keen to avoid introducing a flat wealth tax, instead focusing on reshaping existing levies, including inheretence and property taxes, as well as scrapping the non-dom exception.
The Treasury has so far declined to comment on whether the proposals would appear in the Autum Budget. Officials have stressed recently that a wide range of options were under review, and that ministers would weigh fiscal risks of altering two of the most significant revenue streams in the system.
The Treasury emphasised that the proposals remain at an early stage, with a range of options under review, and that detailed decisions are unlikely before the Autumn Budget. Any detailed announcements are expected to form part of the budget process in October, though implementation could take several years.
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