Chancellor Rachel Reeves is considering replacing stamp duty with a new national property tax on homes above £500,000, according to fresh reports.
Senior ministers in the Treasury have been asked to study how a new “proportional” levy could be implemented and to model its impact ahead of potential tax changes in the Autumn Budget, The Guardian has revealed.
Officials are initially examining a national property tax, which would replace stamp duty on owner-occupied homes, sources said.
The tax would be paid by owner-occupiers on houses worth more than £500,000 when they sell their home, impacting around a fifth of the market.
Stamp duty, which is paid in bands tied to property prices, currently impacts around 60 per cent of the market and is considered to be a serious barrier to home ownership, particularly for first-time buyers.
The average price of a home in the UK was £272,664 in July, according to Nationwide. In London, the average price is around £550,000.
The possible new levy would similarly be determined by the value of the property, with the rate set by central government, which would then directly collect the proceeds via HMRC. It would not replace stamp duty on second homes.
The plans would provide a welcome way of raising revenue for Reeves, who has pledged not to raise taxes on working people.
The Chancellor has also been under pressure to introduce more wealth-based taxes, notably from the deputy prime minister Angela Rayner.
The National Institute of Economic and Social Research (NIESR) has estimated that taxes may have to go up by more than £50bn to cover costs and restore a credible headroom that will make bond traders more assured about Labour’s fiscal plans.
Capital Economics and other leading analysts believe taxes will have to rise in the range of £15bn to £25bn.
City AM has contacted the Treasury for comment.