Why the UK Property Tax System Is Under Pressure
For years, homeowners, buyers, and sellers alike have argued that the UK’s property tax system is outdated, unfair, and a barrier to mobility. Stamp Duty Land Tax (SDLT), in particular, has been heavily criticized for discouraging people from moving, locking up wealth in housing, and penalizing first-time buyers.
Now, Chancellor Rachel Reeves is exploring one of the most dramatic reforms in British housing history: phasing out stamp duty for most transactions and introducing a new national property tax that would shift the burden toward high-value homes.
What Is Stamp Duty and Why Is It So Unpopular?
Stamp duty is a tax paid by buyers when purchasing property in England and Northern Ireland. The amount depends on the price of the property, with thresholds and rates that vary for first-time buyers, movers, and investors.

Why Stamp Duty Has Become a Problem
- Barrier to entry: Buyers already stretched by deposits and mortgages must pay thousands more in tax.
- Regional unfairness: Properties in London and the South East often exceed thresholds, meaning families pay disproportionately high rates.
- Market distortion: Tax “cliff edges” around certain thresholds have led to manipulated pricing and slower transactions.
- Revenue volatility: In 2024–25, stamp duty generated around £11.6 billion, but receipts fluctuate wildly depending on the property market cycle.
The Proposed National Property Tax
The new system being considered would apply a proportional property tax only when homes sell for more than £500,000. Unlike stamp duty, the tax would be paid by the seller, not the buyer.
How the New Tax Works
- Threshold: Applies only to homes sold above £500,000—roughly double the UK average price of £272,664.
- Who pays: The seller, not the buyer, shifting the burden away from those trying to enter the market.
- Scope: Estimated to affect around 20% of property transactions, compared to about 60% currently caught by stamp duty.
Key Differences from Stamp Duty
- Timing: Collected when the property is sold rather than when purchased.
- Fairness: Exempts the majority of households, focusing on wealthier owners of high-value homes.
- Simplicity: Removes confusing tiered rates and cliff-edge thresholds.
Possible Rates Under Consideration
While no official figures have been published, policy think tanks have proposed different structures, including:
- A levy of around 0.5% of property value, payable on sale.
- Higher rates for properties above £1 million.
- Regional variations to account for differences in average house prices across the UK.
Who Stands to Benefit?
Winners
- First-time buyers: Removal of stamp duty eliminates a major upfront cost.
- Average households: With the £500,000 threshold, most families will never face the new tax.
- The wider economy: Reducing barriers to moving could increase market activity and labor mobility.
Losers
- Owners of expensive homes: Especially in London and the South East, where average prices already exceed £500,000.
- Downsizers: Older homeowners selling high-value properties may face significant tax bills, discouraging them from moving.
The Wider Context: Council Tax Reform
Alongside stamp duty reform, the government is also considering modernizing council tax, which is still based on 1991 property valuations. Moving to a current-value property tax could make the system fairer and provide local councils with more stable funding.
The Risks of Reform
While the new tax promises simplicity and fairness, challenges remain:
- Regional imbalance: Families in London could feel unfairly targeted.
- Market impact: A sharp tax threshold could distort house prices around £500,000.
- Revenue uncertainty: If fewer high-value homes sell, government receipts may fall short.
What Homeowners and Buyers Should Do Now
- Buyers: Those on the verge of purchasing may benefit from waiting to see if reforms reduce costs.
- Sellers: High-value homeowners should evaluate whether to sell before reforms introduce a new tax burden.
- Investors: Monitor policy closely—changes could reshape the economics of property portfolios.
Frequently Asked Questions About the Property Tax Reform
Will Stamp Duty Be Scrapped Completely?
Not immediately. Stamp duty may still apply in some cases, but for most transactions under £500,000, it could disappear.
Who Will Pay the New Property Tax?
The tax will be paid by the seller if their home sells for more than £500,000.
Will This Make Homes Cheaper?
In theory, removing stamp duty could ease affordability for buyers. However, sellers may increase asking prices to cover the new tax burden.
How Many Households Will Be Affected?
Around 20% of transactions, mainly in higher-value markets, compared to the current 60% that face stamp duty.
When Could These Changes Happen?
The proposal is under review and has not yet been finalized. Implementation would likely require legislative changes and could take several years.
click here for more