The United Kingdom is once again at the crossroads of property tax reform, as Chancellor Rachel Reeves considers a sweeping overhaul that could reshape how millions of Britons buy, sell, and own their homes. The proposals, first reported by Bloomberg and echoed across major outlets including The Independent and Mortgage Finance Gazette, involve scrapping the current stamp duty system for owner-occupied homes and introducing a new national property tax on sales over £500,000. While the plans are still under review, the debate is already igniting fierce arguments among policymakers, industry experts, and would-be homeowners.
For decades, stamp duty has been a notorious fixture of the UK housing market. Buyers currently pay the tax on properties valued above £125,000—or £300,000 for first-time buyers. This system, long criticized for distorting the market and creating hurdles for movers, generated £11.6 billion in receipts from primary residences last year alone, according to The Independent. But as property prices—especially in London—soar ever higher, the government is under mounting pressure to find a fairer, more stable way to tax property wealth without breaking Labour’s pledge not to raise taxes on working people.
The new proposals, revealed on August 19, 2025, would see owner-occupiers selling homes valued above £500,000 pay a levy based on the property’s value, with rates set centrally and the tax collected by HM Revenue and Customs. In addition, buyers of such properties would face an annual tax on their new homes, a marked departure from the current one-off stamp duty payment. The changes would not affect second homes, which would still be subject to the existing stamp duty regime.
According to Nationwide’s latest house price index, the average UK house price in July 2025 was £272,664—well below the proposed £500,000 threshold. However, in London, the average property price has surged to £666,983, as noted by Simon Gerrard, chairman of Martyn Gerrard Estate Agents, in The Independent. Gerrard, a vocal campaigner for stamp duty reform, has warned that the new tax risks becoming a "London tax" that would hit ordinary families hardest. "Upping taxes for properties over £500K is not making the wealthy pay their fair share, it’s a tax on ordinary Londoners. It’s already nearly impossible for normal people to start a family in London as it is. This London tax will only make it harder," he told The Independent.
Gerrard’s concerns go beyond just the impact on buyers. He predicts that the £500,000 threshold could create a price ceiling, distorting the market for homes around that value. "You’re going to see a ceiling at the £500,000 threshold for that band of the market, as people avoid falling under the regime, and then a significant jump in values with nothing in between. Prices above £500,000 will skyrocket as sellers account for the losses caused by the tax that used to be paid by the buyer," he warned.
TV property expert Kirstie Allsopp also weighed in, telling Times Radio that the overhaul would be "destabilising for people’s homes and mortgages." She argued, "It's not Rachel's to go after because it's their homes. It's the roof over their head. And this government seems to want to punish people for making the sacrifices they've made to buy their own homes."
Despite these criticisms, the proposals have their supporters. The reforms draw heavily on a 48-page report published last year by the centre-right think tank Onward, authored by Dr Tim Leunig, a former government adviser. Leunig’s report advocates for a dual system: a national property tax to replace stamp duty for owner-occupiers, and a local proportional property tax to eventually replace council tax. The goal, he argues, is to create a system that is "easier and cheaper to move house, for a better job, or to be near family, as well as being fairer." In his words, "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."
Leunig also suggests that a new local annual property levy could be phased in to replace council tax, with residents paying a minimum of £800 a year, scaled according to property value. These funds would go directly to local councils, potentially shoring up the finances of struggling local authorities. However, such a shift would likely take longer to implement and, according to Mortgage Finance Gazette, could depend on Labour winning a second term.
Ministers have already been briefed on the proposals, and senior officials are currently modeling their impact and considering a phased approach to roll-out. Treasury sources, as reported by The Guardian and Mortgage Finance Gazette, have emphasized that while a national levy could be introduced within the current parliament, any reform of council tax would be a longer-term project.
The government’s motivation is not solely about fairness. Treasury officials believe a national property tax would offer a more stable source of revenue than stamp duty, which fluctuates with the housing market. Indeed, stamp duty receipts have been on the rise: buyers paid £6.6 billion in the first six months of 2025, a 21% increase on the same period last year. In June alone, receipts totaled £1.1 billion, up 15% from May. Since April 1, 2025, the nil rate threshold for stamp duty dropped from £250,000 to £125,000, meaning more buyers are now paying the tax.
Yet, the new proposals would affect only about a fifth of property sales, compared to around 60% under the current rules. This narrower focus is by design, aiming to target wealthier property owners without penalizing the majority of buyers. Still, the political risks are palpable. Labour’s deputy leader, Angela Rayner, has pushed Reeves to consider measures targeting property wealth, but both she and the Chancellor face the challenge of balancing revenue needs with Labour’s promise not to raise taxes on working people.
In a statement to the press, a Treasury spokesperson underscored the government’s priorities: "The best way to strengthen public finances is by growing the economy – which is our focus. Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8bn and cut borrowing by £3.4bn. We are committed to keeping taxes for working people as low as possible, which is why at last Autumn’s Budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of Income Tax, employee National Insurance, or VAT."
As the debate rages on, one thing is clear: the way the UK taxes property is set for its biggest shake-up in years. Whether Reeves’ reforms will make the system fairer, or simply shift the burden in new and unexpected ways, remains to be seen. For now, homeowners and buyers alike are watching closely—and bracing for change.
