Chancellor Rachel Reeves’s consideration of replacing stamp duty with a new national property tax has prompted warnings from across the housing sector about unintended consequences for homeowners.
Jeremy Leaf, the north London estate agent and former residential chairman of RICS, said any change to the system must not simply become “council tax in another name”. He noted that the current council tax regime is riddled with anomalies, based on 1991 property valuations that no longer reflect present realities.
“There are lots of issues with regard to values and type of property in the present system – for example, residents in some areas may pay relatively less than others even though their properties are now much more valuable because council tax was set at a time before gentrification or other improvements,” he said.
Leaf argued that replacing stamp duty with a levy paid on sale could remove barriers to mobility. “We are very much in favour of incorporating this tax as a substitute for stamp duty as the latter is a tax on moving,” he said.
“We are trying to encourage growth; as a country, we want to see improved job and social mobility. Stamp duty stops that, particularly among those on the margins, such as first-time buyers, as it is such a big investment.”
IMPACT ON THE VULNERABLE
However, he warned that proposals risk penalising older homeowners who are less able to move. “We can see the advantage in taking tax from people who have benefited from an increase in property values but the fear is that it is going to impact the vulnerable in particular,” he said.
“For those more on the margins, say in their early eighties, who are not so mobile and don’t want to move out of an area where they have lived comfortably for many years near family and friends – why should they have to move some distance where property prices happen to be cheaper?”
TREAD CAREFULLY
Industry body Propertymark also urged ministers to proceed cautiously. It said reforms must be “fit for future purpose” and support people at all stages of homeownership, from first-time buyers to those seeking to downsize.
Timothy Douglas, head of policy and campaigns at Propertymark, said: “Discussions around reforming Stamp Duty are welcome because it is a significant barrier to moving and getting people on the housing ladder. What’s key is that any reforms are evidence based and support first-time buyers, second steppers and those looking to right size.”
He added that reducing the financial burden of stamp duty could spur more housing transactions and in turn support economic growth. But he stressed that any new regime must reflect regional variations in property values and avoid penalising aspiring homeowners already facing high deposits.
REPLACE STAMP DUTY
According to reports the Treasury has been modelling the impact of a proportional property tax on homes worth more than £500,000, which could initially replace stamp duty on primary residences.
Ministers are also considering whether a broader local property tax could eventually supplant council tax, though such reform is seen as a longer-term project requiring at least a second Labour term.
No decisions have been taken but officials acknowledge that council tax reform is politically fraught and administratively complex.
Reeves faces growing pressure from colleagues including Angela Rayner, the deputy prime minister, to explore wealth-based taxes ahead of the autumn budget.
