With the Budget approaching, there is one familiar theme appearing in the pre-Budget speculation: property taxes truly are the ‘will they, won’t they’ of housing policy in recent times.
Speculation started early last summer, with reports that then-Chancellor Rachel Reeves was considering a radical reform of both stamp duty and council tax into a single property tax.
This idea, long favoured by some, would have a strong redistributive effect, raising overall property taxation in London and the southeast, with cuts in most other parts of the country. The Fairer Share campaign wrote an open letter to the Chancellor last autumn, led by Hartlepool MP Jonathan Brash, which argued that households would save over £500 a year on average.
Though, with this reform likely to take multiple years – indeed, it would likely straddle the next general election – what materialised instead was a new high-value council tax surcharge.
This addition to the existing council tax system was designed to raise £435 million by 2030-31 by levying an additional charge on owners of residential properties valued over £2 million in England from 1 April 2028, with a new valuation process set up to capture in-scope properties.
A consultation on the surcharge closed in July this year and has yet to receive a response, giving the Government an opportunity at the Budget later this month to announce changes to the scheme, including thresholds or exemptions.
Despite this opportunity, it is not expected that the £2 million threshold will be lowered to £1.5 million, with the Chancellor having rejected such proposals.
The Times suggests John Healey views changes to the scheme ahead of its introduction in April 2028 as undermining the reforms as a whole. This could be explained in part by the near doubling of properties included in the surcharge – from 127,000 to 243,000 – if the threshold were lowered.
Indeed, the Financial Times warned that Labour MPs in London and the southeast warned of “electoral suicide” if more households were brought into scope.
There’s a political angle here too. The Conservative Party are pushing reform to property taxation as a pillar of their policy platform. But unlike proposals to replace council tax and stamp duty with a single new levy, the Conservatives are proposing scrapping stamp duty altogether, which they argue would support the housing market as a whole.
Therefore, while property taxes were the main story in the sector in the run-up to last year’s Budget, any mention this year seems more likely to focus more so on implementation than policy change.
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