A cross-party think tank has urged Chancellor Rachel Reeves to consider raising taxes on property as part of the upcoming November Budget.
The think tank, Demos, has suggested a range of reforms aimed at making property taxation more value-based and, in their view, fairer for the general population.
Central to their proposals is the introduction of an annual property tax. This would apply to homes valued at £500,000 and above, potentially replacing existing council tax and stamp duty.
In addition, Demos recommends a Mansion Tax targeting ultra-high-value properties worth over £2 million. This would act as an additional annual charge, significantly increasing the tax contribution of the wealthiest homeowners.
Under the plan, property taxes would be calculated based on a home’s market value rather than one-off charges at the point of sale. Buyers of properties above £500,000 would pay a percentage of the property’s value annually.
Properties valued over £1 million could be subject to higher rates, ensuring that the wealthiest homeowners contribute proportionally more. This would function as a national property tax, potentially combined with a local property tax to replace council tax.
Demos argues that implementing these measures could generate over £3 billion in additional revenue for the government. The think tank also claims the system would be fairer by reducing the burden on salaried workers.
It would also address perceived advantages enjoyed by wealthier individuals, particularly through high-value capital gains and inherited assets, which currently benefit from lower effective taxation in some cases.
Chancellor Reeves recently told the BBC that she does not intend to raise VAT in the November Budget, keeping the standard rate at 20% and the lower 5% and 0% rates unchanged for certain goods and services.
However, she did not repeat a promise made to the Confederation of British Industry last year that there would be “no more borrowing or more taxes” following the 2024 Budget. Instead, Reeves emphasised that changing global conditions require flexibility and a focus on economic stability.
In her keynote speech at the Labour Party conference, Reeves warned that the months ahead would bring further challenges. She noted that decisions on public finances would be complicated by international pressures and long-term domestic issues.
Demos’s proposals signal a shift in thinking about property taxation. Instead of one-off taxes like stamp duty, homeowners would face a predictable annual tax, based on the market value of their property.
The Mansion Tax would specifically target the wealthiest property owners, aiming to generate significant revenue while addressing inequalities in the current property tax system.
For homeowners in the £500,000–£1 million range, the proposed annual tax could replace lump-sum payments with smaller, predictable yearly charges. Proponents argue this would make the system simpler and more equitable.
As the November Budget approaches, the debate over property taxation is intensifying. Demos’s proposals highlight the challenge for the government: raising revenue fairly, maintaining economic stability, and balancing the interests of homeowners across the market.
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