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Post updated: October 15th, 2025
The Chancellor Rachel Reeves left open the idea of higher property taxes at the Labour Party Conference in Liverpool on 29 September. In her speech, the chancellor pledged to keep “taxes, inflation and interest rates as low as possible”.
She had hinted there may be tax rises ahead because the government’s choices had been made “harder” by international events and the “long-term damage” done to the economy.
However, she confirmed in an interview with Sky News on 15 October that the government was considering making tax hikes at this year’s Budget, the first time she has made the admission in public.
While no decisions have been made at this stage about what is in the forthcoming Budget, it has been widely reported that the Treasury has been considering since the summer a radical overhaul of the way property is taxed. These proposed changes include:
And if these rumours make you worried, I’m afraid it doesn’t stop there. The think-tank IFS is urging Rachel Reeves to double council tax for certain higher value properties and for inheritance tax to be reformed to lower the threshold at which it is paid. Jump to read more on this.
Here’s what we know so far about the proposed new property taxes…
Stamp duty is currently paid when a property is bought. Those buying homes for less than £125,000 do not pay stamp duty and first-time buyers are exempt on properties worth up to £300,000. Those buying a second home or an investment are charged above the standard rate.
For everyone else, depending on the purchase price, stamp duty can run into tens of thousands of pounds. This is seen as unfair and undermines growth. Hence our scrap stamp duty campaign.
Over the summer, reports in the Guardian suggested officials have been asked to study how a new ‘proportional’ property tax could be implemented and model its impact before reporting back to ministers. According to a paper by Tim Leunig at Think Tank Onward, which has informed Treasury thinking, this proposal would see stamp duty scrapped and replaced with:
Around a fifth of property sales would be hit by this new property tax, compared to around 60% of home buyers who currently pay stamp duty.
But for those who would have to pay the national property tax, they could face significantly higher bills than they currently pay on stamp duty. As a result, people who own homes in areas with higher house prices will be hit hardest if this new property tax goes ahead.
Critics fear this will make people even more reluctant to move home in these areas and discourage people from downsizing into smaller homes.
The amount would be based on the value of the property and the national property tax rate, which would be set by the government.
While the reports don’t mention specific figures, Treasury officials have been reportedly in part drawing on the findings of The Onward Think Tax report “A Fairer Property Tax” which states “an annual rate of 0.54%, with a 0.278% supplement on values over £1m would raise the same amount as stamp duty”.
Commentators suspect this new property tax won’t run as it would be unlikely to replace the revenue from stamp duty which last year alone raised £11.6bn for the Treasury coffers.
Again, in the absence of details from the government this is impossible to say. But the Onward report guiding government thinking says, ‘the replacement for stamp duty would not be retrospective on properties on which stamp duty has already been paid’.
For those who have just moved and paid stamp duty, it says:
“The tax is a replacement for stamp duty. It will only be applied to houses once they have been sold – with a few exceptions… This means that there are no losers. Someone who bought their house last year, and paid a substantial sum in stamp duty, will not be asked to pay this tax in addition. But, someone who plans to buy a house next year will pay this tax – but will avoid paying stamp duty. “
Obviously there will be winners and losers here according to where the government draw the line on when the tax applies. Would it be people that bought a house last year? Or in the last 5 years?
Pre-Budget speculation of a new property tax has triggered a 4% drop in buyer demand for homes listed for £500,000 or more, compared with the same period last year, Zoopla data shows.
While in the past five weeks, buyer demand for homes priced at £1 million or more is down 11% compared to the same point a year ago.
Zoopla said: “None of these ideas came directly from the Government, but they are presented as ‘options ministers are considering’, which has been enough to unsettle parts of the market.”
Meanwhile, sellers are also holding back ahead of the November 26 Autumn Budget. Zoopla’s analysis shows there are 9% fewer £1 million+ homes listed for sale than a year ago, and 7% fewer £500,000-plus properties.
By comparison, demand and new supply across the rest of the market ‘remain in line with last year’, Zoopla said.
Paula Higgins, CEO of HomeOwners Alliance, said:
“We have campaigned for many years for stamp duty to be scrapped completely for those buying homes to live in. It’s a tax that puts off families from moving up the property ladder, fleeces homeowners needing to make a sideways move and makes it more expensive for older generations to downsize.
“But we don’t believe the answer is to simply swap it for a new property tax. There shouldn’t be a money grab by Treasury at the expense of homeowners. It’s an attack on homeowners and history shows that introducing a new tax is never followed by the removal of older taxes.
“In the interim the government needs to tread carefully. Uncertainty around property taxes causes paralysis in the housing market – and the figures from Zoopla show this may already be happening.
“We know how damaging uncertainty can be: in April this year, when Stamp Duty thresholds changed, transactions collapsed by 64 per cent in a single month – the sharpest fall on record. Homeowners can’t afford a repeat.”
Officials are said to be studying whether after a national property tax is brought in to replace stamp duty, a new local property tax could replace council tax in the medium term, according to reports.
But again, there’s a severe lack of detail. If this goes ahead in the way the Onward report proposes, it would mean owners (rather than residents) of properties worth up to £500,000 would pay varying rates of tax depending on the value of their home, with a minimum payment of £800 a year, which would go directly to local councils.
While it’s widely agreed council tax needs reforming, we think it’s unlikely the government will want to add the challenge of reforming council tax to their already long list of national challenges.
In a separate move, the Treasury is also said to be considering introducing a ‘mansion tax’. It’s understood the October budget could see the current exemption from capital gains tax under private residence relief ending for properties above a certain price threshold.
If this happens, some homeowners could face a CGT bill when selling their primary residence. The CGT rate is 18% for basic rate taxpayers and 24% for higher-rate tax payers.
While the threshold is the subject of live discussion in the Treasury, officials believe it could raise significant sums of money, reports The Times. A threshold of £1.5 million would hit about 120,000 homeowners who are higher-rate taxpayers. It reports that on average, sellers of £1.5 million-plus homes across England and Wales made a gain of £836,219 compared with what they paid.
The newspaper has calculated the average capital gains tax bill would be £199,973.
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There’s no doubt that the government has a big financial black hole to fill – and it seems there is no end to the options for getting homeowners to help fill it. The latest is from the Institute for Fiscal Studies (IFS) which says the chancellor could raise tens of billions of pounds a year more in revenue without breaking manifesto promises not to increase income tax, National Insurance or VAT for working people.
Options set out in the IFS’s report include:
If you own a house in council tax bands G or H you could see your council tax bill soar, if the IFS’s suggestions are adopted.
The think tank says doubling council tax for properties in these bands could raise £4bn. You can check what council tax band you’re in on the government’s website.
Plus, it suggests either removing or relaxing the current cap of 3% for annual council tax increases in England (5% for local authorities with responsibility for social care services). This could see bills for all homeowners hiked further.
More broadly, the think tank also recommends other changes to the council tax system, which has been criticised as outdated and not reflective of property values.
The think tank also suggests making changes to inheritance tax rules. With inheritance tax, in the 2025-2026 tax year, everyone has a tax-free inheritance tax allowance of £325,000 – this is known as the nil-rate band. While the residence nil-rate band is an additional property allowance of £175,000, providing you leave your home to direct descendants including children or grandchildren.
But the IFS suggests reforming inheritance tax to abolish this additional tax-free allowance – it says this could raise around £6 billion.
Under the current system, a married couple can pass on up to £1,000,000 without being liable for inheritance tax, providing they’re passing on a primary residence to a direct descendent. Read more and see worked examples in our guide Inheritance tax on property.
If this IFS suggestion is adopted by the chancellor, this figure would be slashed to £700,000.
Find more detailed information on the suggestions in the IFS’s report.
Looking to Budget-proof your finances? Get advice on inheritance tax, find a tax adviser specialising in estate planning through our partners at Unbiased. Book a free initial consultation today.
You don’t have to make life’s big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.
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