Labour MPs are advocating for a fundamental shift in the UK's property tax system, proposing the replacement of council tax and stamp duty with a proportional property tax. This proposal, championed by MPs representing northern constituencies, aims to alleviate tax burdens in their areas while potentially increasing costs for homeowners in the South East of England.
The proposed "Proportional Property Tax" would involve an annual levy of 0.48 percent on all homes. According to analysis from the campaign group Fairer Share, this reform could lead to an average annual tax bill of approximately £1,410 for a home in England. Under this system, homeowners currently paying the average Band D council tax could see their annual bills reduced by around £870.
However, the impact would vary regionally. Homes in London could face an average annual property tax of about £2,660, potentially making homeowners in the capital around £700 worse off compared to current Band D council tax payments. Similarly, while a house in the North East might see an average annual charge of £748, a comparable property in the South East could be liable for £1,824 annually.
Fairer Share estimates that 77 percent of households could benefit from this tax restructuring, with average savings of around £550. The group also suggests that such a change could yield political advantages for Labour in areas where the party has seen support waver to parties like Reform UK or the Green Party.
While Prime Minister Andy Burnham has previously expressed support for a land value tax, he has recently downplayed the immediate prospect of council tax reforms. Nevertheless, several Labour MPs are now actively pressing for a re-evaluation of the current system.
Luke Myer, the Labour MP for Middlesbrough South and East Cleveland, stated that council tax is "crying out for reform." Jonathan Hinder, MP for Pendle and Clitheroe, described the existing property tax system as "broken" and urged for bold action. Jonathan Brash, MP for Hartlepool, argued that a Proportional Property Tax would eliminate the "postcode lottery," create a fairer system, and provide financial relief to struggling households, potentially boosting local high streets.
Fairer Share has highlighted polling data from JL Partners, which indicates strong support for a new property value tax among Labour voters, with backing at more than six to one. Support was also high among Green voters (more than nine to one) and significant among Reform UK voters (more than three to one) and Conservative voters (two to one).
Andrew Dixon, founder of Fairer Share, emphasized that a property tax review is a crucial first step toward a more equitable system. He advocates for exploring a revenue-neutral Proportional Property Tax that could provide financial relief to households facing rising living costs and stimulate local economies. Dixon cautioned against narrowly focused measures like a "mansion tax" alone, stressing that reforms should prioritize savings for ordinary households rather than government revenue.