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September 3, 2025
A radical overhaul of the way property is taxed is being considered by the Treasury, according to reports. These proposed changes include:
Here’s what we know so far…
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 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 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 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?
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 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.
“We’ve just seen how damaging this 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, whether a 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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