Understanding the possible changes and their implications for homeowners
Taxation plays a crucial role in the housing market, influencing the costs associated with buying, selling, and owning a home. Recently, both council tax and stamp duty have been reviewed, with increasing calls to modernise systems that many consider outdated. While reform is not certain, debates about fairness and efficiency keep it a topical issue for households across the UK.
Why reform is being considered
Council tax bands in England remain based on property values as of April 1, 1991[1]. Over the years, property prices have risen unevenly across the country. This leads to two households in very different financial situations paying similar amounts, while others pay disproportionately more. Calls for revaluation aim to make contributions fairer and more aligned with today’s property market.
Stamp Duty Land Tax (SDLT), meanwhile, is one of the most criticised property taxes. Charged on the purchase of homes above set thresholds, it is often seen as a barrier to mobility. Adding thousands of pounds to the upfront cost of moving can discourage downsizing, first-time buyers, and relocation for work.
The case for change
Policymakers are examining whether reform could enhance fairness while preserving revenues. In 2021/22, SDLT generated £14.1 billion, with £10.17 billion coming from residential property transactions[2]. However, receipts remain volatile.
In 2023/24, total stamp taxes fell by approximately 23%, dropping from £19.1 billion the previous year to £14.8 billion[3]. These fluctuations underscore the reliance on market activity and raise questions about long-term sustainability.
Council tax reform remains a debated topic. Options involve revaluing homes using current prices, adding new bands for higher-value properties, or restructuring the system to be more progressive. Each proposal shifts the burden of who pays more or less, which explains why progress has been slow.
What changes could look like
Potential reforms could involve:
- Updating council tax bands to reflect current values, which could result in higher bills in areas experiencing significant price increases and lower bills where prices have risen less.
- Lowering stamp duty thresholds to ease access for first-time buyers and those upgrading their homes.
- Replacing one-off charges with regular levies distributes the cost over time but results in ongoing liabilities for homeowners.
None of these options is clear-cut. Every modification creates winners and losers, and governments must balance fairness with political and economic repercussions.
Implications for homeowners
For households, reform could mean changes in annual expenses or the upfront costs of moving. Those in higher-value properties might face larger council tax bills, while buyers of modest homes could see relief if thresholds are modified. For sellers, lower stamp duty might encourage more movement in the market, but annual property-based charges could raise longer-term costs.
What is evident is that the current system is under pressure. Outdated valuations and unpredictable transaction taxes make reform a repeated issue. For homeowners and buyers, keeping informed about the debate’s course helps them be better prepared for any changes.
Preparing for the future
Currently, no decisions have been finalised. Proposals are still under discussion, with the Office for Budget Responsibility (OBR) and HM Treasury monitoring revenues and the impact of housing activity on the wider economy. For households, the focus should stay on understanding how property taxes operate today, while recognising that reform could change them in the future.
Source data:
[1] gov.uk/guidance/understand-how-council-tax-bands-are-assessed
[2] commonslibrary.parliament.uk/research-briefings/sn07050/
[3] gov.uk/government/statistics/uk-stamp-tax-statistics/uk-stamp-tax-statistics-2023-to-2024-commentary
