Student landlords will be alarmed to hear that the Chancellor Rachel Reeves is exploring a new property tax targeting homes sold for more than £500,000, The Guardian reveals.
This proposed tax aims to replace stamp duty for owner-occupied homes and could pave the way for a significant council tax overhaul, addressing long-standing issues in local authority funding.
Chancellor Rachel Reeves is laying the groundwork for tax increases in the upcoming Autumn Budget.
However, the plan has not gone down well with property industry experts.
A 'proportional' property tax
The newspaper says that senior ministers have instructed Treasury officials to investigate the feasibility of a 'proportional' property tax.
This will be assessed for its potential impact before being presented to decision-makers.
Sources told The Guardian that this national tax would initially focus on replacing stamp duty, with a longer-term vision of introducing a local property tax to succeed council tax - should Labour win a second term in government.
The proposed national tax would apply to owner-occupiers selling homes valued above £500,000, with the tax rate determined by the property's value and collected centrally by HM Revenue and Customs.
Notably, stamp duty on second homes would remain unaffected.
Labour's proposal is not popular
The proposal to replace stamp duty with a new property tax has ignited a fierce debate among property experts.
Timothy Douglas, the head of policy and campaigns at Propertymark, urged careful consideration and said: "Discussions around reforming Stamp Duty are welcome because it is a significant barrier to moving and getting people on the housing ladder.
"What's key is that any reforms are evidence based and support first time buyers, second steppers and those looking to right size."
He added: "Economic growth can come from reducing the financial burden of Stamp Duty which we know increases the number of transactions, but any changes must work alongside differing property prices and the dynamic nature of our housing markets across the country."
Other critics warn of unintended consequences with Sir Mel Stride, the Conservative Shadow Chancellor, telling the Telegraph that the plan is a 'tax grab' that could penalise aspiring homeowners.
He said: "Under Labour, your home and future are at risk."
'Council tax by another name'
Craig Fish of Lodestone Mortgages said: "Reeves is chasing quick revenue, but this could freeze the market, especially in high-value areas like the south."
He predicts reduced transactions and lower overall tax income.
Rightmove's Colleen Babcock acknowledges the burden of stamp duty and said: "It stifles movement for everyone, from first-time buyers to downsizers."
She supports reforms that make moving affordable but warns: "Without clear details, it's uncertain if this new tax will benefit or harm property owners."
Jeremy Leaf, a north London estate agent, questions whether the proposal is a 'council tax by another name'.
He highlights the outdated council tax system, rooted in 1990s valuations, and said: "Reform is costly and complex, and a new tax would need extensive consultation."
Mr Leaf suggests raising council tax might be a simpler revenue boost, depending on the scale of funds needed.
Student landlords must prepare
The managing director of Accommodation for Students, Simon Thompson, said: "Undoubtedly, the proposed property tax could reshape the financial landscape of property ownership.
"While the tax targets owner-occupied homes sold above £500,000, the unchanged stamp duty on second homes means rental properties, often key to student housing, will face existing levies."
He added: "Student landlords must brace for a shifting tide, as this tax signals a broader rethink of property wealth.
"And if council tax reform follows, then the student housing market will undoubtedly be affected, which could impact student landlords even more."
