Over the past week, and in advance of the autumn Budget, the government has been testing the reaction to potential property tax changes. While no formal announcements have been made, the proposals under consideration suggest a willingness to overhaul a system which is for the most part remined unchanged for decades. The reforms aim to raise revenue, improve fairness, but most of all, boost economic growth—but each comes with trade-offs.
Three ideas have emerged as frontrunners; taxing capital gains on high-value primary residence sales, introducing an annual property tax to replace both stamp duty and council tax, and shifting stamp duty liability from buyers to sellers.
Capital Gains Tax on High-Value Home Sales
Perhaps the most radical proposal floated is the introduction of Capital Gains Tax (CGT) on residential property sales above a certain threshold. While the exact level is yet to be confirmed, The Times suggests the government is considering applying CGT to primary residences sold for more than £1.5 million. Currently, only second home sales command a CGT rate of 24% for higher-rate taxpayers and 18% for basic rate.
This change would mark a fundamental shift in how property is taxed—potentially moving away from taxing purchases to taxing “profits”. The logic is clear, taxing gains is arguably more progressive, targeting wealth accumulation rather than mobility. But the implications could be far-reaching.
Our analysis shows that just 1.0% of homes sold in England over the past 12 months exceeded the £1.5m mark, which would limit the number of households impacted by the change. Yet those sellers achieved, on average, a gross gain of £836,200 compared to what they originally paid. That’s a substantial uplift—and whilst there will likely be costs that can be offset, it could translate into a hefty tax bill if CGT were applied. In fact, 91% of sellers in this price bracket sold for more than they bought, underscoring the scale of potential liability.
The regional skew is stark. In 2024, 81% of all £1.5m+ sales were concentrated in London and the South East. In contrast, across the other regions, £1.5m+ sales make up less than 0.5% of all sales. This means the proposal would disproportionately affect homeowners in the South—many of whom may have owned their properties for decades and seen values rise through long-term inflation and market growth.
While the headline gains may appear substantial, they often mask a slower pace of appreciation. For example, the average annual uplift for £1.5m+ sellers in London was 8% over the past 20 years. In some cases, house prices haven’t kept pace with inflation. This is particularly true for those who have bought homes in central zones during the past decade. For these households—especially those who don’t need to move—the prospect of a CGT bill could act as a tax on inflation and a disincentive to sell.
There’s also the risk of behavioural distortion. A hard threshold at £1.5m could create a cliff edge, with sellers pricing just below the limit to avoid tax, and buyers steering clear of homes that might tip them over. This could reduce liquidity in the upper end of the market, dampen transactions, and ultimately weigh on house price growth and Treasury revenues alike.
In theory, taxing gains rather than purchases could improve mobility—especially below the threshold. But in practice, unless inflation-adjusted, it risks penalising long-term ownership and may introduce new frictions into an already complex market.
An Annual Property Tax to Replace Stamp Duty and Council Tax
The second proposal is more sweeping; scrap both stamp duty and council tax, and replace them with a single annual levy—potentially set at 0.48% of property value, as outlined by the think tank, Onward’s, proposals last year. It would be a once-in-a-generation reform that would touch every household in the country.
Together, Council Tax and Stamp Duty raise around £58bn annually, making them the fifth largest source of government revenue after Income Tax, National Insurance, VAT and Corporation Tax.
Stamp Duty has become a major barrier to mobility, especially in high-value areas, with the one-off cost often equating to or exceeding an annual salary. Council tax, meanwhile, is based on 1991 valuations and often bears little resemblance to current property values. Our research suggests that around 30% of homes are incorrectly banded, particularly in the South. A single, annual tax could fix these distortions, streamline collection via HMRC, and allow for redistribution of funds across local authority boundaries.
But the trade-offs are significant. Around 17% of homeowners nationally would pay more under a 0.48% annual tax. In London, that figure jumps to 75%—and nearly 100% for those in Bands F to H. Lower-income homeowners in high-value areas, who currently have the option to avoid stamp duty by staying put, would be hit hardest. Renters, too, could feel the pinch if landlords pass on the additional cost.
It’s worth pointing out that council tax is tied to local services, creating a direct link between what residents pay and what they receive. Centralising revenue could weaken that accountability and reduce incentives for councils to drive growth. And while annual revaluations might sound fairer, they’re notoriously difficult to get right—especially without a transaction to anchor the value.
In short, while a combined property tax could improve mobility and efficiency, it risks creating new inequities and undermining local control.
Shifting Stamp Duty from Buyer to Seller
The third proposal is more tactical; flip the stamp duty liability from buyer to seller for homes sold above £500,000. It’s a relatively simple change, but one that could have complex consequences. Stamp duty on second homes would apparently remain.
In the short term, depending on how it’s introduced, it could be quite disruptive. Many sellers—particularly in London and the South East—have already paid hefty stamp duty bills on their original purchase. Asking them to pay again on sale could be double taxation, especially if their property hasn’t appreciated much. It could also push up asking prices, as sellers try to recoup the cost.
But longer term, there’s a case to be made. Making the seller liable is arguably more progressive. It turns stamp duty into a tax on house price growth, rather than a barrier to entry. That could significantly reduce upfront costs for first-time buyers, particularly in expensive areas. It might even help unlock supply by making it easier for younger households to get on the ladder and benefit those moving up.
Still, the reform risks creating another cliff edge—this time at the proposed £500,000 mark. Sellers may be reluctant to list homes above the threshold, while buyers may favour properties just below it. And for downsizers, it could be another reason to stay put, reducing the number of larger family homes coming to the market.
Conclusion - Reform with Caution
Each of these proposals suggests a desire to modernise the property tax system—to make it fairer, more efficient, and more aligned with today’s housing realities. But reform is never simple. The housing market is a delicate ecosystem, where even small changes come with ripple effects.
The challenge for policymakers is to balance ambition with caution and practicality. To ensure that reforms don’t just raise revenue, but also support mobility, affordability, and economic growth. And to recognise that while the current system has flaws, it also has strengths—many of which could be lost in the rush to redesign.
Importantly, even the process of considering reform can be disruptive. The current swirl of rumours and speculation can influence behaviour quickly, particularly among wealthier households who are most likely to be affected. With so many of the proposals targeting high-value homes and long-term owners, we may see signs that some sellers pause their decision to move until there’s more clarity. That hesitation could dampen transaction volumes in the short term, especially in London and the South East, where the impact of these reforms would be most keenly felt.
As ever, we’ll be watching closely. And modelling the impact, should any of these ideas move from rumour to reality.
