The Labour government under Andy Burnham has ruled out introducing a new property levy that would replace council tax and stamp duty, but the proposal remains on the table. Homes valued at £900,000 could face an annual increase of £2,388 if the levy is implemented, according to analysis by Hamptons.
Government considers property tax overhaul
The levy, which is being considered by Parliament, would replace the current council tax system in England, which is based on 1991 property valuations. This means most homes pay tax based on their value from over three decades ago, before significant market increases. Critics argue this system is outdated and unfair, particularly for regions like the North.
Labour MP Jonathan Brash, representing Hartlepool, suggested that "70 per cent of households in the North East would be better off" under the new model. However, the South would be disproportionately affected, with a three-bedroom property in suburban London worth £900,000 facing an extra £2,388 per year.
Impact on homeowners and renters
David Fell, an analyst at Hamptons, noted that a centralised levy could be more efficient than the current system where 300 councils collect independently. However, he warned that "lower income homeowners in higher value areas like London would be hit hard." He explained that many homeowners currently avoid stamp duty by staying put, but under a new levy, they would face ongoing costs.
Renters could also feel the impact, as Fell highlighted: "Renters, who don't currently pay stamp duty, may end up paying more, either in tax or via higher rents." He also cautioned that "changes in values could mean uncertain income for councils and will be open to challenge."
Political and market reactions
Tom Bill from Knight Frank commented on the proposals, stating that "cross-party support or not, proposals should feel politically neutral to avoid replicating the unintended consequences seen with stamp duty changes in the last decade." He emphasised the need for a liquid property market that raises revenue for the Exchequer regardless of location, which "would be a real break from the past."
Burnham has ruled out the levy at this moment, saying, "It's just not the case that we are bringing forward plans, on that scale, at this moment in time." However, the property levy remains a possibility for future consideration, and the debate over reforming council tax continues.
