The UK Chancellor Eyes Property Tax Overhaul: Stamp Duty May Be Replaced for Homes Over £500,000

Chancellor Rachel Reeves is reportedly exploring a significant overhaul of the UK’s property taxation system by potentially replacing stamp duty with a new national property tax targeting higher-value homes. This initiative, currently under internal discussion within the Treasury, could be one of the key policy shifts announced in the upcoming Autumn Budget, as the Labour government looks for new ways to raise public revenue without increasing the tax burden on ordinary working individuals.

The current system of stamp duty is a long-standing transaction tax paid by homebuyers when purchasing property in the UK. It's levied on a sliding scale depending on the value of the property, with higher bands attracting higher tax rates. Under this regime, roughly 60% of residential property transactions fall within the scope of stamp duty, meaning most buyers—especially in high-cost regions like London and the South East—are liable to pay it. For many, particularly first-time buyers, stamp duty represents a substantial financial barrier to entering the housing market, in addition to already high house prices and mortgage costs.

The average property price in the UK, as of July, stood at approximately £272,664, according to data from Nationwide. However, property values vary considerably across the country. In London, for example, the average home costs around £550,000, meaning a significant proportion of buyers in the capital are paying thousands in stamp duty. In this context, the proposed reform could dramatically change how tax is applied to property ownership and movement.

According to reports in The Guardian, senior Treasury officials have been asked to develop models and projections to assess the feasibility and impact of a “proportional” national property tax. This tax would apply to owner-occupied homes valued above £500,000 and would be levied when the property is sold—essentially functioning as a transfer tax but calculated differently than current stamp duty.

While details are still being formulated, initial proposals suggest this new tax would not cover second homes or investment properties—only primary residences over the threshold. It would also be centrally managed, with HM Revenue and Customs (HMRC) collecting the revenue, unlike council tax, which is collected locally. The amount due would be directly linked to the value of the home, though it remains unclear whether this would involve a flat rate above the threshold or a series of bands, similar to how stamp duty currently operates.