As the United Kingdom approaches its highly anticipated autumn Budget, Chancellor of the Exchequer Rachel Reeves faces mounting pressure to address a widening fiscal gap without breaking her own borrowing rules. With the Budget expected in late October or early November 2025, speculation and concern swirl around potential changes to property taxation—an area that could both refill government coffers and reshape the housing market for years to come.
According to BBC News, Reeves is confronting a stubborn deficit between public spending and tax income. Economists warn that unless she finds billions in additional revenue, the government is on track to overshoot its self-imposed borrowing limits. Having already raised levies by £40 billion in her inaugural budget last year to stabilize the country’s finances and fund public services—a move that plugged a hole left by the previous Conservative government—Reeves now faces even tougher decisions. With repeated assurances that income tax, employee national insurance, and VAT will not rise, the focus has shifted squarely onto property-related taxes.
At the heart of the debate is the possible removal of capital gains tax (CGT) relief on main residences above a certain value. Currently, homeowners selling their primary residence are exempt from CGT, which is otherwise charged at 24% for higher-rate taxpayers and 18% for lower-rate taxpayers. According to The Times, the government is actively discussing ending this exemption for pricier homes. A threshold of £1.5 million, for example, would reportedly affect around 120,000 homeowners, saddling each with an average CGT bill of £199,973. The precise threshold remains under discussion, but the principle is clear: wealthier homeowners may soon face a hefty tax on the gains from selling their homes.
But how much money could this actually raise? In the last financial year, CGT brought in £13.3 billion, according to BBC News. However, critics argue that removing the exemption could slow down high-value property transactions, potentially limiting the revenue boost the government hopes for. Simon French, chief economist at Panmure Liberium, described the proposal as "potentially incredibly lucrative but also incredibly controversial."
Stamp duty, the tax paid by buyers when purchasing property, is also under review. Currently, properties under £125,000 are exempt, and first-time buyers enjoy relief up to £300,000. Above these thresholds, rates climb from 2% to 12% depending on the property’s value. In the last financial year, stamp duty raised £11.6 billion. There is talk of abolishing stamp duty altogether, but this would mean a significant loss of revenue unless replaced with another tax.
One replacement under consideration, reported by The Guardian, is a new tax on owner-occupiers selling homes over £500,000, possibly combined with a comprehensive reform of council tax. However, government sources cited by The Times suggest that setting the threshold as low as £500,000 could stall the market, especially in regions like London and the South East where average home values are already high. Previous proposals for a so-called "mansion tax" have typically set the bar at £1 million or above.
Industry voices are weighing in with both support and caution. Jason Tebb, president of OnTheMarket, told CoStar News, "We welcome any proposals that aim to reduce the financial barriers to home ownership. The potential reforms to stamp duty could make a meaningful difference, especially for first-time buyers and those who are constrained not by monthly mortgage affordability, but by the significant stamp duty outlay required upon completion." However, he emphasized that changes must accommodate significant regional variations in house prices.
Others warn of unintended consequences. Andrew White, head of UK residential at Colliers, noted, "When you start hearing about major tax shifts as a house buyer or seller you are going to pause which seems unnecessary and unhelpful, particularly at the moment." He cautioned that stalling the market would be "disastrous and illogical," especially given the £9 trillion value of UK residential property. White also pointed out the practical difficulties of replacing stamp duty with an annual property levy, citing the need for updated valuations (the last were done in 1991) and the risk of undermining trust in the market.
Timothy Douglas, head of policy and campaigns at Propertymark, welcomed discussions on stamp duty reform but insisted that changes "must work alongside differing property prices and the dynamic nature of our housing markets across the country." Meanwhile, Daniel Austin, chief executive at Ask Partners, argued that a new tax on homes sold for over £500,000 "is a short-term fix that would do little to close the gap in public finances, stabilise the property market, or support long-term economic resilience and growth." He recommended increasing housing supply as a better way to unlock market mobility.
Another major target for reform is council tax, a levy that funds local authorities and is currently based on property values from 1991. Critics argue that this system creates unfair disparities: a house valued at £1 million pays only twice as much council tax as a house worth £80,000, despite the vast difference in market value. As BBC News reports, government proposals to overhaul council tax have faced scrutiny for potentially shifting funds between areas and sparking political backlash. Tom Bill, head of UK residential research at Knight Frank, remarked, "Council tax reform is long overdue but any package of measures would need to be carefully calibrated to ensure it didn’t reduce transaction numbers, particularly in the sort of high-value markets the government seems to be relying on to raise revenue."
There are also concerns about the timing and implementation of such sweeping changes. White suggested a three-year timeframe would be needed to put new systems and technology in place to handle inevitable valuation disputes. The risk, he said, is that buyers and sellers might "sit and wait," further slowing an already sluggish market. He also warned that retrospective changes could undermine trust, especially for those who have planned their retirement around a mortgage-free home.
For the government, the challenge is to raise revenue from wealthier homeowners without derailing the housing market or penalizing those—like pensioners—who may be looking to downsize. As the debate unfolds, the Treasury has remained tight-lipped, with a spokesperson stating, "We are committed to keeping taxes for working people as low as possible."
With the Budget just weeks away, all eyes are on Reeves and her team. The decisions made this autumn could redefine the property tax landscape, with far-reaching consequences for homeowners, buyers, and the broader economy.
The UK’s property tax debate is as much about fairness and economic pragmatism as it is about revenue. The government’s next steps will reveal whether it can thread the needle between raising funds and maintaining trust in one of the country’s most vital markets.
