Is it possible to replace stamp duty and council tax with a new tax?

Although Number 10 has disassociated itself from reports that Prime Minister Andy Burnham was thinking about changing the property taxation system, how would a land value tax or proportional property tax operate?

Andy Burnham, the new prime minister, has refuted reports that he was actively considering ideas to replace stamp duty and council tax with alternatives that represent a property's current value.

It comes after The i Paper revealed that he was considering alternatives to the existing property taxation system, such as a land value tax or a proportional property tax.

Number 10, however, has denied that Burnham is thinking about doing away with stamp duty and council tax.

Rumors that the prime minister is thinking of replacing stamp duty and council tax with either a land value tax or a proportional property tax are "not true," a spokesperson told BFIA.

Watch the entire video here. They also stated: "The chancellor makes tax decisions at fiscal events, as has always been the case."

Burnham has previously stated that it is unfair that households in wealthy areas of London, such as Westminster or Wandsworth, pay significantly less in council tax than households in less affluent areas, where home prices are significantly lower.

"There are people here in Manchester who pay a much higher council tax than people living in much larger homes in London," Burnham stated in a July 26 interview with the BBC.

"Rachel Reeves, the former Labour chancellor, was correct to begin reforming council tax in order to bring some justice to those who live in much more valuable homes and have not seen their council tax increase over time due to the failure to revalue the banding."

Those who own expensive homes would pay more in taxes under a proportionate property tax.

Although Number 10 has since stated that this is "not true," there had been rumors that Burnham was thinking of eliminating stamp duty and council tax in favor of a flat annual fee of 0.48 percent on a home's current value.

The amount of council tax paid by residents in areas with lower home prices would be significantly reduced by this proportional property tax approach, while the amount paid by residents in more expensive areas would increase.

For instance, according to Lloyds, a property in the North East, which is where house prices are lowest in England, cost an average of 181,133 in June.

The average household would have to pay 869 annually if the tax was imposed at a flat rate of 0.48 percent. Compared to Newcastle's Band D council tax rate of 2,540, this is significantly less.

Conversely, the average London home, which Lloyds estimates costs 534,831, would pay 2,567 annually. In every borough of London, a Band D property would pay much less than this.

Kingston upon Thames is the most expensive borough in London for council tax, with Band D costs of £2,050 annually. Under the proposed proportional property tax, a household in this borough would pay an additional £500 per year.

Westminster, on the other hand, has the lowest council tax rate, with a Band D property paying just 935 annually, which is more than 1,500 less than the proposed proportional property tax for the typical London home.

However, according to the ONS, the average price of a property in Westminster is 836,000, which is significantly more than that of other parts of London.

The more expensive your home is, the more you will have to pay because the proposed proportional property tax is a flat annual levy on its current value. For instance, the annual cost of a £1.3 million home would be £6,240.

Is it possible to impose a land value tax?

According to reports from The i Paper, Burnham's team was considering a land value tax (LVT) as an alternative to council tax and stamp duty.

Instead of the property's actual value, a land value tax is paid on the land's worth.

This implies that, in theory, a big five-bedroom home in a desolate and isolated part of the nation would pay a lot less in taxes than a comparable home in the heart of London.

According to research by Tax Policy Associates, households in practically every region of the country would pay significantly less tax if a land value tax were implemented, while those who reside near major cities would typically pay significantly more.

Is it possible to reduce the threshold for the mansion tax?

Then-chancellor Rachel Reeves announced a new tax on expensive homes in the Autumn Budget of 2025. Based on 2026 property values, the High Value Council Tax Surcharge will go into effect in April 2027.

Known as the "mansion tax," households with homes valued at more than £2 million will be required to pay an extra council tax surcharge of £2,500 to £7,500 annually, depending on the property's value.

Tenants would not be responsible for paying the surcharge because the mansion tax is applicable to homeowners rather than occupiers, whereas residents are typically responsible for paying council tax.

According to the Mail of Sunday, Burnham was considering lowering the mansion tax threshold to 1.5 million before he was appointed prime minister, which might force 150,000 more households to pay the tax.

If the proposals were implemented, would you pay more taxes?

People who live in low-cost housing in areas of the nation where real estate is inexpensive would be the biggest beneficiaries of a land tax or a proportional property tax. A yearly fee of 0.48 percent would probably be significantly lower than the current council tax rates given the low cost of housing.

If their property is not located in a major city or in the southeast of England, they would also pay less under a land value tax.

However, those who own expensive homes in affluent areas of the nationparticularly those who reside in areas of London where council tax is currently lowwould be the biggest losers.