Londoners could be made to pay up to £950 more a year under radical new proposals put to the government to fix England’s “broken” property tax system, reports BritPanorama.
A new report from the Resolution Foundation calls for the complete abolition of council tax and stamp duty in favour of a new levy directly tied to the value of residential property.
London households underpaid by £3.1 billion in property taxes in 2024-2025 due to the current “outdated” valuation system, the influential think tank finds.
Under the proposed plan, 80 per cent of London households would face higher bills, with the top 20 per cent seeing an average increase of £950 a year. In total, nearly two-thirds (68 per cent) of households across the capital would pay at least £250 more annually, while 20 per cent of low-income single residents would see their bills fall through expanded rebates.
This ‘proportional property tax’ would be charged at a flat 0.7 per cent of property value, phased in over four years.
Hannah Aldridge, senior research and policy analyst at the Resolution Foundation, stated: “The UK raises more tax revenue from the homes we live in than most other advanced economies. Unfortunately, our two main housing taxes – council tax and stamp duty – are terribly designed, grossly unfair and economically harmful.”
She added, “Our housing taxes fall heaviest on those least able to afford them and have turned into a huge £3.1 billion subsidy for those living in London – paid for by households across the rest of England.”
Aldridge emphasised that while the economic and fairness case for overhauling housing taxes is clear, political challenges remain. Particularly, those in gentrified areas of London often resist changes despite most households in England standing to pay less tax.
Outside of London, around 61 per cent of households will be overpaying on their property tax by 2030-2031, according to the report, with that figure rising to 85 per cent in the North East, at an average of £710 a year, which would be saved under the proposals.
In England, the current council tax system remains based on bands established in 1991, which experts assert have long become outdated. The rise in London house prices over three decades has led to disparities, such as a standard home in Blackpool paying nearly £600 more than a £10 million property in Mayfair.
Former chancellor Rachel Reeves announced a high-value council tax surcharge, or “mansion tax”, expected to begin in April for owners of properties valued over £2 million, with annual charges of up to £7,500.
However, the Resolution Foundation argues that this change will not significantly drive growth, predicting annual revenue around £400 million.
As the Budget approaches, reported considerations from Prime Minister Andy Burnham include expanding these plans to properties worth at least £1.5 million, potentially doubling yearly receipts to £800 million and increasing the number of affected properties from 123,000 to approximately 245,000.
A government spokesperson commented: “We have reformed housing tax to address a longstanding unfairness in our country, where a Band D home in Darlington or Blackpool pays more in council tax than a £10 million mansion in Mayfair. Decisions on tax are a matter for the chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”
