Andy Burnham’s coronation as PM later this month has triggered fevered speculation over what approach his new Labour government might take as it rushes to finalise its policies.
With Burnham pledging not to stick to Labour’s election manifesto not to increase income tax, VAT or National Insurance, attention has increasingly turned to property as a potential source of additional funding. In recent weeks, it means the papers have linked Burnham to a range of possible reforms, including the abolition of Council Tax and Stamp Duty, the introduction of a Land Value Tax and changes to Labour’s proposed Mansion Tax.
None, though, has yet received formal backing from Burnham or his team. Below, we look at the proposals behind those rumours and what they might entail.
Annual property tax
What is it?
One of the most widely discussed proposals is the scrapping of both Council Tax and Stamp Duty, replacing them with a single annual property tax.
The idea has been championed by campaign group Fairer Share, which argues the current system is outdated and unfair. Council Tax is based on property valuations from 1991, and Stamp Duty adds a significant upfront cost whenever someone moves home, so it adds barriers to the buying and selling process.
How would it work?
Under Fairer Share’s proposal, homeowners would pay an annual charge equivalent to 0.48% of a property’s value. Second homes, empty properties and homes owned by overseas buyers would pay 0.96%.
A homeowner with a £250,000 property would pay £1,200 a year, while a £1 million property would attract an annual charge of £4,800.
The proposal would replace two of Britain’s best-known property taxes with a single annual charge.
Potential benefits
Fairer Share claims around 18 million households would pay less under the system.
Recent research from Jackson-Stops shows removing Stamp Duty could have a significant impact on housing mobility. The agency estimates that more than 300,000 owner-occupied homes could come to market within a year if Stamp Duty costs were removed, rising to more than 750,000 over three years.
The report also found that greater certainty over the home-moving process could unlock more than 260,000 owner-occupied homes within a year, rising to more than 700,000 over three years.
Nick Leeming, Chairman of Jackson-Stops, says: “Stamp Duty is clearly part of the wider mobility challenge. While it is not the only factor shaping moving decisions, our data shows it remains a meaningful barrier for some would-be movers.”
He adds: “A healthier housing market is about more than building new homes, essential though that is. It is also about helping existing homes circulate more freely, so that more people can make the move that is right for them.”
Tom Bill, Head of UK Residential Research at Knight Frank, also sees merit in shifting the focus away from transaction taxes.
He says: “The concept of taxing the asset rather than the transaction is sensible as it would improve social and economic mobility, generate tax revenue in other areas like VAT, get rid of a universally disliked tax and ultimately generate a more stable flow of revenue.”
Potential drawbacks
Critics, though, argue that replacing Council Tax and Stamp Duty with an annual levy could create substantial winners and losers.
Amy Reynolds, Head of Sales at Antony Roberts, warns that homeowners in London and the South East could be hit particularly hard.
She said: “The principle is sound, but I fear the execution will be catastrophic.”
Bill also warns that it could have unintended consequences.
“Annual revaluations will turn house price growth into an ongoing tax liability, which would inevitably affect decision-making.”
Land Value Tax
What is it?
A Land Value Tax would be charged on the value of the land beneath a property rather than the building standing on it.
How would it work?
Supporters argue a Land Value Tax would encourage development and reduce incentives to leave land unused.
Burnham has previously described himself as persuaded by the case for it and has argued that land is under-taxed.
Potential benefits
Proponents say it could encourage more efficient use of land, encouraging owners to make maximum use of it and capturing some of the increase in value created by planning decisions and public investment.
Several Labour MPs have publicly backed the idea, arguing it would shift more of the tax burden towards wealth tied up in real estate.
Potential drawbacks
Critics argue that assessing land values separately from buildings would be complex and could create significant implementation challenges.
There are also concerns about how any new system would affect development, investment and property values.
Mansion tax
What is it?
Labour has proposed an annual surcharge on high-value homes, often referred to as a Mansion Tax.
How would it work?
Under current proposals, homes valued above £2 million would face an annual surcharge which would start at £2,500, rising to £7,500 for properties worth more than £5 million.
Recent reports have suggested ministers are actively considering lowering the threshold to £1.5 million.
Potential benefits
Supporters argue higher-value property owners should contribute more towards funding public services and that property wealth remains relatively lightly taxed compared with earnings.
Pressure for higher wealth and property taxes has also grown among some Labour MPs and trade unions.
Potential drawbacks
Critics argue that lowering the threshold could bring significantly more homeowners into the tax’s scope, particularly in London and the South East where property values are much higher than the national average.
Opponents also warn that higher annual property taxes could discourage investment and reduce housing market activity.
How likely are these reforms?
Although some of the proposals have been linked to Burnham’s previous comments on property taxation, others originate from campaign groups, industry bodies, Labour MPs or newspaper reports rather than Burnham himself.
There was similar speculation around Rachel Reeves’ Budgets, when reports of potential tax rises and reforms unsettled the property market in the run-up to her budget announcements. In the end, the final measures proved far less dramatic than feared.