With the government considering major reforms to replace Stamp Duty with a new National Property Tax, homeowners should understand the potential impact early. We've developed thihs calculator to give a quick estimate.
The proposed reforms could see homes worth over £500,000 subject to a proportional property tax, potentially starting at rates like 0.48% of market value annually. The calculator here helps you explore different scenarios based on the latest proposals from Chancellor Rachel Reeves.
Moving from Transactional to Annual Property Taxation
Our current system relies heavily on SDLT (Stamp Duty Land Tax), a tax paid when a property changes hands. It’s tiered (as you can see in our stamp duty calculator) and can be substantial on higher-value homes or additional properties.
While SDLT provides meaningful revenue for the Exchequer, it’s widely criticised for discouraging mobility, slowing downsizing, and contributing to market "stickiness". The new proposals are seeking to answer questions like: could we tax property wealth more consistently, reduce barriers to moving home, and still protect the public finances?
Three strands of property tax reform have been floated in this year:
- A National Property Tax (NPT) for owner-occupied homes, possibly focused on properties above a threshold (frequently cited around £500,000), charged either annually or deferred until sale.
- A Council Tax overhaul, replacing 1991 bands with valuations linked to current market values — potentially a local property tax. Advocacy groups such as Fairer Share have argued for a flat percentage of market value (e.g., 0.48%) to replace Council Tax and related levies.
- A "mansion tax" style measure, including the option of applying Capital Gains Tax (CGT) to primary residences above a high-value threshold (figures like £1.5 million have been discussed), which would remove the current private residence relief for those cases.
None of these changes are final. The Autumn Budget 2025 is expected to provide clarity, and any Council Tax revaluation is widely seen as a longer-term project, potentially beyond 2029.
How the System Works Today
Stamp Duty Land Tax (SDLT) in England and Northern Ireland
SDLT is a one-off, tiered tax paid by buyers upon purchase. From April 2025, residential bands apply with rates starting at 0% up to £125,000 and rising in steps to 12% above £1.5 million. First-time buyers get relief on eligible purchases, while buyers of additional dwellings face a 3% surcharge on top of standard rates. Non-residents have an additional 2% surcharge. Equivalent taxes exist in Scotland (LBTT) and Wales (LTT), with different bands and rates.
Council Tax
Council Tax supports your local council services and is based on 1991 property valuations in England. Because values have shifted differently across regions since 1991, the tax is widely considered outdated.
Proposals being floated range from a flat-fee model by value tiers (e.g., £800 for properties up to £500,000, with higher charges thereafter) to a proportional, valuation-based levy (e.g., a percentage of current market value).
Capital Gains Tax and primary residences
At the moment the main home is typically exempt from CGT via private residence relief. Some new proposals would remove this relief above high-value thresholds, introducing a CGT (capital gains) charge on gains when very expensive main homes are sold. While this targets wealth tied up in property, critics argue it could deter downsizing and reduce transactions.
Will we be Better Off or Worse Off?
Better off:
- First-time buyers: Removing or reducing SDLT at purchase lowers the upfront hurdle to buying.
- Owners of lower-value properties: A reformed Council Tax or local property tax aligned to current values could reduce bills outside high-growth regions.
- The housing market overall: Lower transaction frictions could free up homes and boost mobility.
Worse off:
- Owners of high-value properties: A mansion tax/CGT on main homes above £1.5 million, or a proportional local tax on full market value, would increase liabilities for the top end of the market.
- Landlords/second home owners: Additional surcharges or lower thresholds for investment properties would likely raise annual costs, potentially flowing through to rents.
- Some older homeowners: If changes discourage downsizing or raise ongoing costs for high-value homes, there could be knock-on effects in supply of family homes.
How Government Revenue Could Be Affected
Any move away from a large, one-off transaction tax towards an annual property levy changes the timing and distribution of revenue.
In the short-term replacing SDLT with an annual NPT can reduce immediate receipts, as SDLT is concentrated at the moment of purchase while NPT accrues over time.
In the medium-term increases activity in the property market with more frequent moving could increase overall economic activity and related tax receipts (e.g., VAT on home improvements, corporation taxes across the housing supply chain). But this is uncertain and depends on the design of rates and thresholds.
In the long-term a broad-based annual tax tied to market value could be more stable and less cyclical than transaction-based SDLT, potentially smoothing revenue across the cycle. Council Tax modernisation would likely improve fairness and, if set carefully, could be fiscally neutral or positive once fully implemented.
How to use our National Property Tax Calculator
The calculator lets you:
- Estimate an annual National Property Tax (NPT) on your property’s market value under a proposed/tunable rate.
- Apply different thresholds for owner-occupied versus additional properties (buy-to-let/second homes).
- Add a surcharge for additional properties.
- Compare the estimated annual NPT with the one-time SDLT you would pay today, including a simple break-even estimate of how many years of NPT equals your current SDLT bill.
In order to reduce complexity there are of course some assumptions:
- Thresholds: You can set an exemption threshold (e.g., £500,000 is often cited in discussions for owner-occupied homes). The calculator applies the rate only to the value above the threshold, avoiding “cliff-edge” effects in the estimate.
- Annual rate: Defaults to 0.48% as an illustrative value (aligned with public campaign suggestions for a proportional property levy), but you can adjust it. Additional properties: You can toggle an “additional property” option. If on, the calculator applies a separate (lower) threshold and an extra surcharge (you can adjust both).
- SDLT comparison: Uses 2025 SDLT bands to compute a one-time purchase cost for context.
This tool provides indicative estimates based on proposals being discussed publicly. More information on government policy including rates, thresholds, surcharges, and timing, will most likely be set out in official announcements and legislation around October 2025.