Andy Burnham is reportedly considering significant reforms to the property tax system, potentially replacing both council tax and stamp duty with a single annual property tax. This proposal, if enacted, could lead to substantial changes in how homeowners are taxed, with those owning more expensive properties likely facing higher liabilities.
The proposed system, which aligns with ideas from the campaign group Fairer Share, would introduce a 'proportional property tax.' Under this model, homeowners would pay a flat tax rate of 0.48 percent on their property's value, collected monthly. While this rate is proposed, Burnham could adjust it. At the suggested rate, the tax would aim to generate revenue comparable to current council tax and stamp duty collections combined.
This shift would significantly alter the tax burden. For example, a home valued at £250,000 would incur an annual tax of £1,200. This is substantially less than the average council tax for a Band D home in 2026-27, which is projected to be £2,392, according to the Ministry of Housing, Communities and Local Government. Such homeowners would also benefit from the elimination of stamp duty when they move.
Conversely, owners of more valuable properties would likely pay more. A home worth £1.2 million would be subject to an annual tax of £5,760. This compares to an average annual charge of £4,600 for homes in the highest council tax band (Band H).
Fairer Share estimates that approximately 18 million households, or 77 percent of all homes, could see their property tax costs decrease, with an average saving of £556. Households with homes valued below roughly £500,000 might pay less than the current average Band D council tax. Areas with lower property values are expected to benefit more, while markets like London could see increased tax burdens.
The current council tax system faces criticism for its perceived unfairness and regional disparities. Analysis by Fairer Share highlighted that a Band D property in Makerfield, Burnham's constituency, faces a council tax bill of £2,152, more than double that of a Band D property in Westminster (£1,048). This means homes valued at £280,000 in Makerfield could incur higher council tax than £10 million properties in Westminster, resulting in effective property tax rates of around 0.75 percent versus 0.02 percent.
Fairer Share's plan includes a cap on annual tax increases for primary residences, limited to £1,200. For a £10 million home in Westminster, this would mean an increase from £2,095 to £3,295 annually. However, this cap would not apply upon sale, as the new owner would benefit from the absence of stamp duty, facing the full proportional tax liability. The proposal also includes provisions for asset-rich, cash-poor households, such as pensioners in expensive, mortgage-free homes, allowing them to defer payments until the property is sold.
Renters would no longer pay council tax directly, as the responsibility would fall to landlords. This could potentially save millions of renting households thousands of pounds annually. However, landlords might attempt to recoup costs through rent increases. The Renters' Rights Act, which came into effect in May, restricts rent increases to once a year and prohibits them within the first 12 months of a new tenancy, requiring increases to align with market rates and be challengeable at a tribunal. The elimination of stamp duty could also make it more affordable for tenants to eventually purchase a property.
Owners of second homes or empty properties not rented out would face a double tax under the proposals. A £1 million second home could incur an annual tax of £9,600, as the £1,200 cap is designated for primary residences. Second home buyers would still be subject to stamp duty, which currently includes a 5 percent surcharge for UK buyers and a 7 percent surcharge for overseas buyers.
The calculation and collection of the new tax would likely involve the Valuation Office Agency. Valuations could be based on sales data and local market changes, potentially utilizing algorithms similar to those used by property websites. Central government would collect the tax and distribute funds to local councils.
Experts suggest that implementing such a radical tax overhaul presents significant challenges. The process of re-valuing every home, as current council tax valuations are based on 1991 data, would be a monumental task. Automated valuation models may struggle with unique properties like those with extensions or in rural areas, potentially leading to disputes over property values. Property commentators note that past attempts to introduce similar land value taxes have faltered due to disagreements over valuations.
Rumors of tax changes can also introduce market uncertainty, potentially causing buyers to pause their plans. While the removal of stamp duty could stimulate the market, the prospect of a new, potentially higher, annual tax on expensive properties might lead to short-term price decreases in those areas. The full implementation timeline, according to Fairer Share's plans, would be phased over three years, meaning significant action would be required shortly after a potential election in 2029. Rob Dix of Property Hub commented that ambitious property tax changes are difficult to enact and typically require a strong parliamentary majority to overcome potential unpopularity. 
