Chancellor Rachel Reeves is moving toward one of the most consequential shifts in UK housing policy in decades — replacing Stamp Duty Land Tax (SDLT) with a new annual property tax system, potentially including a 1% levy on homes worth more than £2 million. The plan, still under final review ahead of the Autumn Budget 2025London on November 26, could upend how millions of homeowners pay for the privilege of owning property — and it’s already sending ripples through the market.
Why This Matters to Every Homeowner
Right now, you pay stamp duty only once — when you buy. But under the proposed system, you’d pay annually, based on your home’s current value. That’s a fundamental shift. For someone in London with a £2.5 million home, that could mean an extra £5,000 a year. For others, it might mean lower upfront costs when buying — but higher bills year after year. The Treasury says the goal is fairness: taxing homes based on 1991 prices — the basis for Council Tax — is no longer sustainable. It’s like charging the same rate for a 1991 Ford Fiesta and a 2025 Tesla.
The Two-Pronged Plan: Mansion Tax and SDLT Phasing
Two key ideas are in play. First, a ‘mansion tax’ — a 1% annual charge on properties above £2 million. That’s not new; Labour floated it in 2012, but it never stuck. Now, Rachel Reeves is reviving it, reportedly after internal modeling by Her Majesty's Revenue and Customs (HMRC) and research from the think tank Onward, led by economist Tim Leunig. Second, SDLT could be phased out — not abolished overnight, but gradually reduced, especially for homes under £500,000. The idea? Cut the upfront barrier for first-time buyers, while making the wealthy pay more regularly.
There’s a twist: the government is also considering removing the capital gains tax exemption on primary residences above a certain value — effectively turning your home into a taxable asset even if you never sell. That’s a quiet revolution. Most people think their main home is tax-free. Under this plan, it might not be.
Who’s Saying What?
UK Property Accountants warned in late November that implementation would be a logistical nightmare. HMRC’s systems, the Land Registry, and local councils would need massive upgrades to handle real-time property valuations. And it’s not just tech — it’s trust. Many homeowners fear being hit with a bill they can’t afford, even if they’re ‘asset-rich, cash-poor.’ That’s why proposals include deferral options: pay later, when you sell or pass away.
Meanwhile, The HomeOwners Alliance confirmed that Rachel Reeves didn’t rule out higher property taxes during her Labour Party ConferenceLiverpool speech in September — and again in her November 4 pre-Budget address. She didn’t say yes. But she didn’t say no, either. That’s political code for: we’re coming for your equity.
On the other side, Kemi Badenoch, Leader of the Conservative Party, fired back during her October 8 speech, pledging to scrap SDLT entirely on primary homes for UK residents. But her plan excludes second homes and corporate buyers — a clear political counterpunch. It’s not about fairness; it’s about optics. Labour wants to tax the wealthy. Conservatives want to look like the party of homeowners.
The Numbers Don’t Lie — But They’re Messy
Last year, SDLT brought in £11.6 billion. That’s not chump change. Replacing it isn’t just about fairness — it’s about filling a hole in the Treasury’s budget. The Institute for Government says stamp duty holidays — like the ones during COVID — barely helped buyers. They just made sellers raise prices. So why keep it? Because it’s easy. A new system? Not so much.
And here’s the kicker: the reforms won’t be retrospective. If you paid stamp duty on your £1.8 million home in 2023, you won’t suddenly owe back taxes. That’s crucial. It avoids a political firestorm. But it also means the transition will be slow — probably starting with homes over £2 million, then trickling down over five to ten years.
What Else Is in the Budget?
It’s not just property. The Treasury is also reportedly cutting the annual ISA limit from £20,000 to £12,000 — a move that would hit savers hard, especially those using ISAs for retirement. The idea for a ‘Brit ISA’ — requiring 20% in UK stocks — has been scrapped. And to make up revenue, the government is cracking down on unpaid corporation tax. The ‘tax gap’? Around £15 billion a year. Small businesses are the target.
“A revaluation is coming,” said one senior tax advisor who spoke anonymously. “The system is a patchwork quilt stitched together since 1991. We’re not just updating it — we’re rewiring the whole house.”
What Happens Next?
November 26 is the deadline. Until then, the Treasury will keep refining the model. AI-assisted valuation tools are being tested to speed up property assessments — something that could cut years off the rollout. But experts warn: technology can’t fix bad policy. If the new tax hits middle-income homeowners in Birmingham or Leeds who bought in 2015 and saw values double, the backlash could be fierce.
One thing’s clear: the era of paying once to own a home is ending. The question is — who pays, how much, and when?”
Frequently Asked Questions
How would the proposed mansion tax affect me if I own a £2.3 million home?
If you own a home valued at £2.3 million, you’d pay a 1% annual tax on the amount over £2 million — so £3,000 per year. That’s not a one-off fee; it’s recurring. The tax would be based on updated valuations every three to five years, meaning your bill could rise if your property appreciates. Deferral options may be available if you can’t afford the payment, but interest would accrue.
Will stamp duty disappear completely?
Not immediately. The Treasury is considering phasing it out gradually, starting with homes under £500,000, where rates might be cut or eliminated. For high-value properties, SDLT could remain temporarily to smooth the transition. Full abolition would depend on whether the new annual tax generates enough revenue — and whether public trust in property valuations is strong enough to avoid chaos.
Why is HMRC’s system a problem for this reform?
HMRC still relies on 1991-based data for council tax bands and lacks real-time property valuation infrastructure. Updating this requires integrating with the Land Registry, local authorities, and AI-driven appraisal tools — a technical challenge that could take years. Without it, the system risks misvaluing homes, leading to unfair taxes and legal challenges from angry homeowners.
Could this lead to more people renting instead of buying?
Possibly. If annual property taxes rise sharply for middle-income homeowners — especially in areas where prices have surged since 2010 — some may decide renting is less risky. The HomeOwners Alliance estimates that 40% of homeowners under 45 already feel housing costs are unsustainable. A new tax could push that number higher, especially if deferral options aren’t generous enough.
What’s the difference between this and the 2012 mansion tax proposal?
The 2012 version was a one-time levy on high-value sales. This one is annual, based on current market value, and may replace not just SDLT but eventually council tax too. It’s broader, more sustainable, and tied to ongoing revenue needs. Also, unlike 2012, the government now has AI tools and updated data — making accurate valuations more feasible than ever before.
Is there any chance this won’t happen?
Yes. If the Treasury’s modeling shows the new tax raises less than £8 billion annually — or if public backlash grows too strong before November 26 — Reeves may scale back to just cutting SDLT at the top end without introducing an annual charge. The final decision hinges on whether the political cost outweighs the fiscal benefit.