20th August 2025
There has been a lot of talk over the last few days about a new “National Property Tax” proposed by the current Labour Government to replace the current Stamp Duty Land Tax. As expected, this is causing quite a stir within the property industry...but what would the real impact be on buyers and sellers if these reforms come into play?
The headlines mention a "property tax shake-up" but little more information has been released by the government as yet. Surrey HomeSearch have been doing some digging into the possible changes to property tax and what this could mean for buyers, sellers and the property market in general.
First off, let’s consider how homeowners in England and Northern Ireland are presently taxed when they buy a property:
Stamp Duty Land Tax (SDLT): A proportional tax paid on the purchase price of a residential property. Currently this tax is charged for properties purchased over £125,000 and increases on a sliding scale as property price increases. The tax is paid at the time of house purchase and is paid wholly by the home-buyer. Tools such as this Stamp Duty Calculator will estimate the Stamp Duty you would expect to pay when purchasing a property. There is a currently a different and higher tax level for second homes and for non-domestic homebuyers.
As we understand it the Chancellor of the Exchequer, Rachel Reeves, is considering whether to scrap Stamp Duty for future home-owner purchases – and replace this tax with some form of “National Property Tax”.
Sources suggest that this new Property Tax will apply only to homeowner/occupiers and not to those who buy-to-let or buy a second home (it is suggested that the current higher rate Stamp Duty would still be payable for second homes and non-dom buyers).
As the details are still vague and officials are stressing that “no decisions have yet been made” it’s hard to predict what impact these changes will have on the property market in England and Northern Ireland: A recent BBC report stated that "one such replacement could be a tax on owner-occupiers selling homes over £500,000 combined with a reform of council tax".1 Reports from The Times support this, stating that that the Treasury are looking at tax reform suggestions made by thinktank Onward in their recent paper, A Fairer Property Tax , in which a levy would be imposed on home-owners through an annual charge based on a portion of the home’s value above £500,000.2
Let’s assume that the Chancellors’ reform is to be based on the proposal by Onward and the government scraps Stamp Duty, in favour of this annual National Property Tax. In this scenario, UK home-buyers purchasing a property as their first/main residence will be subject to an annual tax (Onward propose that a 0.54% charge on the portion of a home’s value above £500,000, rising to 0.81% on the portion above £1m would bring in as much revenue as the current Stamp Duty, so perhaps this is a good place to start).
There is a strong argument that the current Stamp Duty is a tax on mobility and that the removal of the hefty Stamp Duty Tax on purchasing a property would make property purchase easier for first-time buyers especially for those properties purchased at £500,000 or less – who would not be subject to this tax.
It is our understanding that current homeowners will not be subject to this new tax (as they have already paid Stamp Duty) and so if this change came into effect, it would be for future purchases only. As first glance this may still appear to make moving house less attractive, but compare the annual fees to the existing lump-sum Stamp Duty and this becomes less of a factor.
Based on Onward’s proposal, those purchasing a property at £500,000-£1,000,000 could see an annual property tax of up to £1,350. For many this will seem preferable to the existing lump sum Stamp Duty tax of between £15,000 to £27,500 currently charged for the same property.
For those looking to purchase a property between £1M-£2M, the new tax might mean swapping a one-off stamp duty bill of anywhere up to £150,753, with annual payments of up to £11,000. Buyers looking to move house more regularly than every 13-14 years may actually see a fall in their overall tax bill.
For High Net Worth Individuals (HNWI) purchasing their primary residence in England or Northern Ireland of £3M or above could expect to pay annual charges of £19,000+ per year under a new National Property Tax rather than the current one-off Stamp Duty Tax of over £273,750.
It is worth noting that the tax would only be for home-owners who occupy their home. It would not be charged for example for second or multi-home owners, or those who buy as an investment. We understand that the existing higher rate Stamp Duty would still be payable for second homes and buy-to-lets.
Similarly, the proposal does not aim to replace the existing non-resident stamp duty land tax supplement. If this is the case, these particular proposed changes to property tax, shouldn’t impact foreign or rental investment.
Many argue that the current Stamp Duty is out-dated and chokes up the property market – with homeowners less willing to move upsize/ downsize or simply make the move they would otherwise consider due to the high tax bill that they would incur.3
According to Onward, "Stamp duty deters people from moving and leads to an inefficient allocation of housing". They state that "houses valued at under £250,000 are sold once every 11 years, while more expensive homes are sold once in a generation - every 26 or 27 years".4 The abolition of Stamp Duty would certainly make it cheaper to move house. Home-owners looking to down-size will be incentivised to do so, freeing up properties for first time buyers and growing families.
If done correctly, a shake up in tax reform, and the introduction of a new progressive property tax could be welcomed by homeowners across the country. For now, the speculation and panic that is spreading through the property industry feels somewhat premature and possibly slightly misjudged. We’ll update you when we have more clarity on these proposals, but any proposed changes will take time to come into play (possibly beyond the current government’s current term) and so should not impede any current plans you may have to move.
Surrey HomeSearch offer a bespoke property finding service for each and every client. We advise on the locations that will best suit each client and will work tirelessly on your behalf to find you the perfect home. For a confidential chat about your property search, please call Surrey HomeSearch on call us on +44 1483 905160 or email info@surreyhomesearch.co.uk.