Chancellor weighs property tax overhaul

Chancellor Rachel Reeves is considering introducing a new proportional property tax on homes valued at over £500,000, which could replace stamp duty for owner-occupied properties. Second homes would remain subject to the existing stamp duty rules. Under the proposal, the tax would be payable on sale, with rates set nationally and collected by HMRC.

Alongside this, officials are examining the idea of a local property tax that could eventually replace council tax — a reform that would take longer to implement and may depend on Labour securing a second term. The changes aim to tap into rising property values and address long-standing concerns about the current system, which is based on 1990s valuations.

The move is positioned as a way to raise revenue without breaking Labour’s pledge not to increase taxes on working people, and aligns with calls within the party for more wealth-based taxation.

Public reaction has been mixed. Critics argue that in high-cost areas such as London and the South East, a £500,000 threshold risks penalising middle-income households and retirees, suggesting either a higher limit or region-specific adjustments. There are also concerns that it could deter downsizing or prompt sellers to inflate asking prices to cover the tax.

Supporters, however, see it as a fairer approach that targets unearned property wealth, addresses generational inequality, and could help rebalance the housing market.