Real estate remains a juicy plum for Andy Burnham to pick in order to help pay for social care and defence. Photograph: Jon Super/APView image in fullscreenReal estate remains a juicy plum for Andy Burnham to pick in order to help pay for social care and defence. Photograph: Jon Super/APPropertyExplainerAxe stamp duty? How Andy Burnham could change property taxThe new PM could bring in revenue for social care or defence with a land levy or by reforming council taxPhillip InmanTue 11 Aug 2026 16.00 CESTLast modified on Tue 11 Aug 2026 16.01 CESTSharePrefer the Guardian on GoogleResidential property is the largest store of wealth in the UK, and has long been a target for those who believe homes should be taxed more. Real estate remains a juicy plum for Andy Burnham to pick as he searches for ways to pay for an overhaul of the social care system and higher defence spending, to name just two fiscal priorities. Yet how to tax property, or possibly the land it sits on, has vexed economists and politicians for centuries. Here we discuss the background to the debate and some of the tax options.How is property taxed now?Council tax, stamp duty land tax and capital gains tax (CGT) are the main taxes charged on English properties. All residents pay council tax based on the value of the home at 1991 prices and in a series of bands from A to H – while several extra bands are being added at the top end to enact Rachel Reeves’s mansion tax.Property taxes in Scotland, Wales and Northern Ireland are under the control of devolved administrations, who apply different systems – in Wales, property valuations from 2003 are used.Plus, landlords in the UK must pay income tax on rental profits, while companies pay business rates based on the rental value of their premises.Together, the UK raises more from property taxation than any other country in the OECD. The Office for Budget Responsibility has estimated that council tax receipts will total £51bn in the 2025-26 financial year, plus £34bn from business rates, and £17bn from property transaction taxes (including stamp duty).Like King William III’s window tax, council tax is widely considered to be a failure, or at least past its sell-by-date, leading to calls from politicians on left and right for it to be reformed or abolished.It is a regressive tax, falling more heavily on low-value homes, and rates vary across the country.Stamp duty applies to home sales and takes a bigger slice out of higher-value homes while many cheaper home sales are exempt, making it a progressive tax.Second homes, which are owned by about 10% of main residency owners, are caught by stamp duty and capital gains tax (CGT) on the profit from a sale.Why are there calls to reform property taxes?UK residents owned about £5.5tn worth of property in 2022 after mortgages were deducted, and Burnham’s advisers have hinted that the PM is keen to capture some of this wealth via a single annual tax on property based on the wholesale reform of council tax and abolition of stamp duty.It would be a monster task to revalue all homes in England, and the Valuation Office would need to hire many staff, though artificial intelligence is expected to be a huge support in this exercise.View image in fullscreenThe UK raises more from property taxation than any other country in the OECD. Photograph: Greg Balfour Evans/AlamyCouncil tax’s critics argue that it damages the economy when people are deterred from moving to deprived areas with low house prices, but high levels of council tax. A band D council tax bill in Wandsworth this year is £1,028 while a home in the same band in Leicestershire must pay £2,528.75, just short of the highest band D of £2,625.43 in Dorset.A single flat-rate tax based on land or property valuations would favour poorer areas. It would also provide the government with a regular income because it must be paid whatever the economic situation while stamp duty and CGT largely dry up during recessions, when fewer people are willing or able to buy.What are the options?Economists prefer a land tax because a levy on property deters owners from making improvements that would increase its value. He has also criticised property developers who delay using the land they own because there is no tax to pay until something is built. Land banking is a curse the prime minister wants to end.A land value tax charged at 1.28% of the value, replacing council tax and residential stamp duty, would result in about two-thirds of households paying less, and a third paying more, Tax Policy Associates has calculated.Dan Neidle, the firm’s founder, says under this scheme a band D home (average value of £358,000) would charged £2,551 compared with an average £2,267 council tax bill and a potential stamp duty charge of £7,933. A band H home would be the biggest loser. With an average value of £2.6m, Neidle says the occupier now pays £4,081, but under an LVT that would rocket to £30,534, though should they sell, a £200,000 stamp duty bill would be waived.The scheme takes into account that top-end home values would fall, while the bottom end of the market would rise. Most of the extra charge would apply to London and the south-east with the addition of Trafford in Greater Manchester, Bath and other affluent areas.View image in fullscreenAndy Burnham wants to end land banking and encourage property owners to build more homes. Photograph: Kevin Walsh/AlamyLand tax proponents say that over time, the percentage rate can be increased, allowing politicians to abolish other taxes until such time as income tax and national insurance are swept away, with a land tax paying for everything.Another option would be a proportional property tax – a single flat rate tax charged annually on a property’s value. The Fairer Share campaign have proposed this could be set at 0.48%, and doubled for second homes. Rachel Reeves reportedly examined the merits of replacing stamp duty with a “proportional” property tax in 2025.A third possibility w
