The UK's current property tax system, encompassing council tax, stamp duty land tax, and capital gains tax, is facing calls for reform. Residential property is identified as the largest store of wealth in the UK, and Prime Minister Andy Burnham's advisers are reportedly exploring ways to capture some of this wealth to fund social care and defence spending.
Council tax, based on 1991 property values, is widely criticised as a regressive tax that disproportionately affects lower-value homes. In contrast, stamp duty is considered progressive, taking a larger share from higher-value home sales. The Office for Budget Responsibility estimated council tax receipts at £51bn for 2025-26, with property transaction taxes, including stamp duty, projected to bring in £17bn.
One option under consideration is a single annual tax on property, based on a wholesale reform of council tax and the abolition of stamp duty. This would involve revaluing all homes in England, a task that artificial intelligence is expected to support. Economists also favour a land tax, arguing that it would provide a regular government income and deter land banking by developers.
Tax Policy Associates calculated that a land value tax of 1.28%, replacing council tax and residential stamp duty, could result in approximately two-thirds of households paying less, and a third paying more. For example, a Band D home (average value £358,000) might be charged £2,551, compared to an average council tax bill of £2,267 and a potential stamp duty charge of £7,933.
Other possibilities include a proportional property tax, a single flat rate charged annually on a property's value, or a beefed-up transaction tax that would scrap principal private residence relief and levy capital gains on all property sales.