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The UK Treasury is reportedly exploring reforms to the country’s property tax system, including the potential replacement of stamp duty with an annual property levy for homeowners of high-value properties. Sources suggest that properties valued over £500,000 could face a yearly tax, rather than the current transactional stamp duty system.
Stamp duty, which raised £13.8 billion in 2024-25, has long been criticized for discouraging homeowners from moving, increasing transaction costs, and slowing labor mobility. A proposed annual levy could range from 0.54% for homes above £500,000 to 0.81% for properties exceeding £1 million, based on recommendations from the centre-right think tank Onward and academic proposals by Professor Tim Leunig of the London School of Economics.
From a tax policy perspective, this reform could reduce friction in the housing market and align property taxation more closely with actual wealth ownership. “The current system is impractical and inequitable,” notes Professor Leunig. “An annual property tax would encourage mobility, facilitate economic growth, and modernize the UK’s property taxation framework.”
Local authorities may also benefit under some proposals, which suggest replacing council tax with a fixed local levy of 0.44% on properties valued up to £500,000. Combined with the national levy on higher-value properties, the system aims to create a fairer and more predictable taxation structure for homeowners.
Critics, however, argue that such changes could destabilize the property market and increase the annual financial burden on homeowners, especially in London and the southeast, where property prices have risen dramatically since council tax bands were established in 1991.
While government officials have not confirmed a timetable, the reforms would likely require parliamentary approval and may take longer than a single legislative term to implement
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