First-time buyers could see benefits if stamp duty is scrapped, but property experts caution that Londoners may end up carrying the financial burden of such reforms.
Reports suggest that Chancellor Rachel Reeves is exploring a new tax on property sales valued above £500,000. Analysts warn this could disproportionately affect London, where higher property prices are the norm, potentially putting further pressure on an already fragile housing market.
According to government sources cited by The Guardian, Treasury officials have been tasked with assessing the feasibility of a nationwide property tax. This would act as a replacement for stamp duty on homes purchased as primary residences.
In the medium term, officials are also said to be reviewing whether a reformed property tax could take the place of council tax. The aim of such a change would be to provide additional financial support to local councils, though it is understood that no final decisions have yet been made.
Any confirmed changes are expected to be announced by the Chancellor during a fiscal statement, likely the Autumn Budget scheduled for Wednesday, 26 November. This would be the moment when full details of any reforms become clearer.
The potential impact on London is significant. Data from the Land Registry, analysed by property firm Hamptons, shows that around half of all property sales above £500,000 occur in the capital. A further 26 per cent are in the South East, meaning these areas would bear the brunt of any tax changes.
Tom Bill, head of UK residential research at Knight Frank, has warned of the consequences for the capital. He argues that the reforms could further slow the London property market, which he describes as “the economic epicentre of the country.”
TV presenter and property expert Phil Spencer has also raised concerns. He described the proposals under discussion as potentially “catastrophic” for areas with high property costs such as London.
Spencer stressed that the burden would not fall solely on the wealthy. Instead, he suggested that many ordinary Londoners, already grappling with high living costs, could find themselves facing higher taxes if these reforms go ahead.
An end to stamp duty?
Experts say it is hard to measure the full effect of a new property tax without knowing the exact rates. However, Tom Bill points out that scrapping stamp duty could be positive in principle, as it would remove barriers to social mobility.
At the same time, he warns that relying on the higher end of the property market for a steady stream of tax revenue would be risky, as this sector is often the most volatile.
Richard Donnell, Executive Director at Zoopla, agrees that reform could be a step in the right direction for the housing market over the long term. He believes removing stamp duty would help free up movement and encourage more people to buy, sell, and downsize.
Donnell describes stamp duty as an inefficient tax that places unnecessary strain on the housing sector, discouraging transactions and making it harder for households to move when needed. He sees its removal as a potential boost for both housing activity and the wider economy.
However, he also cautions that the transition could create short-term problems. If thresholds are introduced, he warns the market could face “cliff edges” where activity stalls around certain price points. This disruption could create uncertainty for both buyers and sellers in the near term.
Over the longer term, though, Donnell believes that scrapping stamp duty could get more people moving home. He argues that this would benefit the economy as a whole by improving labour mobility and supporting growth.
Nicholas Mendes, mortgage manager at John Charcol, highlighted another concern: the likely impact on Londoners. With stamp duty currently generating over £11 billion a year, most of it from London and the South East, he argues that higher-value homes in these areas would inevitably bear the heaviest burden under any new system.
This raises not only financial questions, Mendes explains, but political ones too. Londoners could end up feeling that they are paying the price for reforms that mainly help buyers in other parts of the country.
He also warned that sellers of prime London property may rush to complete sales ahead of any changes being introduced, in order to avoid facing bigger bills later on. This, he suggests, could create short-term spikes in market activity followed by slower sales once reforms take effect.
What could it mean for London buyers?
For London’s first-time buyers, the idea of scrapping stamp duty may sound like welcome relief. Yet many property experts argue that the bigger hurdles remain the city’s soaring house prices and the lack of affordable homes coming onto the market.
Data from Rightmove shows the average asking price of a London property has now reached £667,000. Meanwhile, figures from the Office for National Statistics reveal that first-time buyers in the capital paid an average of £483,000 for a home in May this year. At this level, buyers currently face a stamp duty bill of £9,150, which must be settled within two weeks of completing a purchase.
Will Vaughan, director at House Collective estate agents, believes that removing this cost could ease some of the strain on new buyers. He says that with affordability already stretched to breaking point, cutting out stamp duty could help some finally secure their first home.
Nina Harrison, buying agent at Haringtons UK, also sees the appeal of such a move for those trying to get onto the ladder. However, she stresses that in London, the real problem lies in the sheer cost of property, not the tax itself.
She points out that while a £500,000 threshold may sound helpful, in practice it offers little comfort in London or the South East, where it only just covers the price of a modest two-bedroom flat. Families hoping to move up into houses, she warns, would instead face greater costs, effectively subsidising buyers in other regions.
Rather than unlocking the market, Harrison argues, these reforms could end up slowing it down. In her view, the housing ladder risks becoming even more difficult to climb, especially for those living in and around the capital.
Vaughan agrees, noting that the changes could create further stagnation. He suggests that instead of freeing up homes for sale, many owners might simply stay put, holding off from moving and reducing overall supply. This, he warns, would leave fewer options available and add to buyers’ frustrations.
Geoff Wilford, founder of Wilfords London, raises concerns about the longer-term implications. Even if current sellers avoid paying extra tax because they already paid on their purchase, he says buyers will be thinking ahead.
With renovation and extension costs already high, families planning for the future will worry about eventually being hit with a larger bill when they choose to move again. That uncertainty, Wilford believes, could weigh heavily on their decisions and further dampen activity in the market.
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