London property owners are underpaying £3.1 billion in property taxes relative to home values, while households across the rest of England are overpaying, a new report from the Resolution Foundation indicates. The think tank's research highlights that residential property taxes have become disconnected from current house prices, leading to significant regional disparities.
The analysis found that 80% of London households benefit from the current system. In contrast, 85% of households in the North East are projected to overpay by an average of £710 annually by 2030-2031. The report describes the current system as regressive, noting that Council Tax does not reflect nearly four decades of house price growth.
The Resolution Foundation proposes replacing the existing system with a proportional property tax of 0.7% of a property’s value, alongside the abolition of Stamp Duty on primary residences. This proposal includes a rebate scheme for low-income households and a deferral scheme for asset-rich but cash-poor homeowners.
Hannah Aldridge, Senior Research and Policy Analyst at the Resolution Foundation, stated that the UK's main housing taxes are "terribly designed, grossly unfair and economically harmful." She added that these taxes "have turned into a huge £3.1 billion subsidy for those living in London – paid for by households across the rest of England."
The report advises against rapid implementation of reforms, warning that simply announcing the abolition of Stamp Duty could disrupt the market and create a £15 billion hole in public finances. Instead, the think tank recommends that the Chancellor outline a reform pathway in the upcoming Budget, starting with an updated database of property valuations and an independent commission.