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Post updated: November 25th, 2025
Homeowners up and down the country started to worry this autumn when Chancellor Rachel Reeves left open the idea of higher property taxes at the Labour Party Conference 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 had made the admission in public.
On 4 November, in her pre-Budget speech, the Chancellor refused to rule out breaking an election manifesto promise not to increase income tax, although this has since been all but ruled out.
And it has been widely reported since the summer that the Treasury has been considering 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:
Read more in our guide Budget 2025: How much will it cost me? And keep up-to-date with the latest Budget news by signing up to our newsletter:
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.
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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.
Chancellor Rachel Reeves is expected to hit more than 100,000 of Britain’s most expensive properties with a mansion tax, which will cost homeowners an estimated average of £4,500 per year.
It’s understood the mansion tax will be in the form of a levy on properties worth at least £2 million, with an annual charge of 1% of the amount over that threshold.
The original plan was to target homes worth over £1.5 million. But this threshold was increased after MPs warned that setting it at £1.5 million would mean many Labour voters, including public sector professionals, would have been hit by the levy, the Financial Times reported.
Introducing a mansion tax will raise an estimated £400-£450 million, according to reports.
If the mansion tax goes ahead as proposed, if your property is worth more than £2 million, you’ll pay 1% of the amount above that threshold as a tax each year.
While the government may be estimating over 100,000 households will be hit by the mansion tax, research by Knight Frank found the actual figure could be much higher, reports The Times. Its research found that about 0.54% of homes in England and Wales, some 150,000, are worth £2 million+.
Homeowners in London and the South East would bear most of the brunt of the new property tax: just over 60% of £2m+ homes are in London with just under 20% in the South East, according to analysis by Lucian Cook, director of residential research at agents Savills.
The introduction of a mansion tax could see owners of expensive second homes facing a double whammy of extra council tax charges in the form of:
According to research by Hamptons, second home owners of expensive properties could face an average annual council tax bill of £13,700 – for more detailed information, read our guide Second home council tax explained.
Some property experts have warned that introducing this new property tax would push down house prices and create a cliff edge at the £2 million mark where the mansion tax will kick in, according to these proposals.
Aneisha Beveridge, of estate agency Hamptons, said the move would distort values around the £2 million level, “with buyers offering just below to avoid triggering the tax”.
While Jeremy Leaf, estate agent and former chairman of the Royal Institute of Chartered Surveyors, told The Telegraph a mansion tax would cause “market disruption” and disproportionately affect property markets in the capital and the South where house prices tend to be higher.
However, as this will affect the higher end of the market, it’s unlikely to have an impact on the majority of buyers and sellers.
Some homeowners may choose to downsize to avoid paying the mansion tax. However, the high cost of stamp duty will put some potential movers off.
Use our stamp duty calculator to help you work out how much stamp duty you will need to pay
However, given that this only affects properties worth over £2 million, it’s not expected to have a widespread impact.
Paula Higgins, CEO of the HomeOwners Alliance, says: “If a mansion tax is introduced, in the form of a 1% levy on properties worth at least £2 million, with an annual charge of 1% of the amount over that threshold, there must be a long lead-in time because people need to plan.
“Also, we’re rather sceptical about how long the property revaluation process will take, given that we hear so much about how stretched councils’ budgets are. We predict things could start getting very messy, when people get their new valuations and then start appealing if they disagree with them.
“And we’re also concerned about whether this is the thin end of the wedge? Once measures are introduced, they have a habit of being extended or thresholds not being updated, and more people end up paying tax as a result.”
Lucian Cook, head of UK residential research at Savills, told The Times: “You don’t want to undermine the housing market at a time you’re trying to build 1.5 million homes. There is a risk there will be a trickle down from the top of the market.
“If they went too punitive there is also a risk of more capital flight. This is a compromise measure which looks much more about righting the perceived wrongs of the existing council tax system rather than looking to raise significant revenue.”
Tom Bill, head of UK residential research at Knight Frank, said: “Initially while the revaluation process takes place there will be uncertainty around particular price points for buyers and sellers. It will throw a spanner in the works of those sorts of negotiations.
“Once the revaluation has happened then you have the issue that it can be challenged, again particularly around thresholds. We could be looking at a fairly prolonged and messy process that doesn’t yield what the government thinks it will in the short term.
“It will probably have an impact on transactions and activity. Once you have certainty then inevitably prices will adjust and take into account any extra new levy.”
Former Bank of England Governor Mervyn King told Sky News’ Trevor Phillips he could not identify an economic plan from the government and that adding another wealth tax would not solve the problem with the country’s finances.
Lord King said: “Property taxes are an interaction between stamp duty, council tax, capital gains tax, inheritance tax. You don’t solve that problem by just adding another wealth tax to it.”
However, there are also reports that the mansion tax will target homes over £1.5m via capital gains tax, and homes in council bands F, G and H:
It has been rumoured the November budget could see the current exemption from capital gains tax under private residence relief ending for properties above a certain price threshold. This has also been dubbed a mansion tax.
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 said to be the subject of live discussion in the Treasury, officials believe it could raise significant sums of money, reported The Times. It reported 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.
While the Institute for Fiscal Studies (IFS), has suggested reforming inheritance tax to abolish the residence nil-rate band, which is an additional property allowance of £175,000, providing you leave your home to direct descendants including children or grandchildren.
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.
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Another ‘mansion tax’ proposal is to hike council tax for people who own homes in higher-rate bands. This has been proposed in two different ways:
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