The Treasury is examining plans for a new levy on homes worth more than £500,000 as part of a potential overhaul of stamp duty and council tax.

The Guardian reports that officials have been asked to model the impact of a “proportional” property tax, which could initially replace stamp duty on owner-occupied homes.

In the longer term, ministers are also considering whether a local property tax could supersede council tax, in a bid to stabilise local authority finances.

NATIONAL PROPERTY TAX

No decisions have been made, but sources said a national property tax could be introduced during this parliament, while council tax reform would require at least a second Labour term.

The initiative reflects Treasury efforts to capture more revenue from rising property values, with council tax still based on 1991 valuations.

“The new levy would be paid on sale by owner-occupiers.”

The new levy would be paid on sale by owner-occupiers of homes above £500,000, with the rate linked to property value and collected by HMRC.

It would not apply to second homes. Around one-fifth of sales would be affected, compared with about 60 per cent under current stamp duty.

Stamp duty on primary residences raised £11.6 billion last year, though revenues fluctuate with housing market activity. Advocates of the new system argue it would provide a steadier stream of income.

The proposals draw on a report from Onward, the centre-right thinktank, which suggested a dual national and local property tax.

CHEAPER TO MOVE

Tim Leunig, the report’s author and a former Treasury adviser, argued: “These proposals would make it easier and cheaper to move house, for a better job, or to be near family, as well as being fairer.

“It should not be the case that a terrace house in Burnley pays more than a mansion in Kensington – and it wouldn’t be under these proposals.”

Reeves faces pressure from colleagues including deputy prime minister Angela Rayner to explore wealth-based taxes as she prepares this autumn’s budget.