LONDON, Sept 24 – Chancellor Rachel Reeves is considering a range of property tax reforms ahead of her 26 November Budget as she seeks to plug a growing gap in the UK’s public finances without breaking Labour’s pledge not to raise income tax, national insurance, or VAT.
Economists warn Reeves is on track to breach her own fiscal rules on borrowing unless she finds billions in new revenue. Proposals under discussion include changes to stamp duty, capital gains tax (CGT), and new levies on landlords, each carrying political risks as well as potential rewards.
National Insurance for landlords
One option being examined is to extend National Insurance contributions to all landlords. At present, most rental income is exempt unless letting is a full-time business. The Resolution Foundation has suggested imposing a 20% basic rate and 8% higher rate on property earnings above £50,270, a reform it says could raise £3bn a year once phased in.
Torsten Bell, former chief executive of the Resolution Foundation and now a Labour MP, has been linked to the policy’s development within the Treasury. Critics, however, warn such a move could increase rents and deter investment in the private rental sector.
Capital gains tax changes
Another controversial measure would be to reduce or remove relief on CGT for higher-value primary home sales. Currently, main residences are exempt, but reports suggest properties above a certain threshold could face CGT at 18% or 24%, depending on the seller’s income.
The tax raised £13.3bn in 2023–24, but Simon French, chief economist at Panmure Liberium, told the BBC that extending it to main homes would be “incredibly lucrative but also incredibly controversial”. Labour previously pledged not to impose CGT on main residences during its first term, leaving Reeves facing a political dilemma.
Abolishing stamp duty
Stamp duty, which generated £11.6bn last year, is also under review. The tax is widely criticised as a barrier to first-time buyers and downsizers, but its removal would create a significant hole in Treasury revenues. Reports suggest any abolition would need to be paired with alternative measures, such as a new annual property tax.
Under proposals from the think tank Onward, a proportional property tax could be levied on homes worth over £500,000, set at 0.54% of value above that threshold. Supporters say this could match stamp duty revenues, though others warn it would not deliver the same upfront revenue stream.
Council tax overhaul
The government is also facing calls to replace council tax, which is based on outdated property valuations from 1991 in England and Scotland, and 2003 in Wales. Critics argue this creates unfair disparities between households in similar homes across different regions.
Reforms could redistribute funding between councils, but such moves are politically sensitive and risk creating winners and losers across the country. Ministers have repeatedly acknowledged frustrations with the system, but no final proposals have yet been confirmed.
Political balancing act
Reeves is under pressure from both financial markets and her own party to restore confidence in the government’s fiscal discipline. While new taxes on property could deliver much-needed revenue, Labour risks alienating middle-class voters who form a large part of the housing market. Opposition MPs have already accused the government of preparing “stealth taxes” that would punish homeowners.
At the same time, business groups and economists warn that tinkering with housing taxes could have broader economic consequences. A slowdown in property transactions could dampen consumer spending and reduce overall tax receipts, undermining the very fiscal stability Reeves is seeking to achieve.
With borrowing costs rising and a £20bn gap looming, Reeves must decide whether to risk voter backlash by overhauling property taxation or seek savings elsewhere. Options ranging from landlord levies to CGT on high-value homes are being weighed, but each carries potential costs for households and the housing market.
For homeowners, landlords and tenants alike, the November Budget could mark a turning point in how property is taxed in Britain. Apps like Pie help individuals stay prepared by tracking income, tax obligations, and upcoming liabilities, offering clarity as sweeping reforms are debated.
