The Labour government is considering a major shake-up of property taxation.

According to The Guardian, Treasury officials are exploring two linked reforms: a national property tax on homes worth more than £500,000 that replaces stamp duty (to be paid by sellers rather than buyers) and, further down the line, a replacement for council tax.

Both ideas come from the recognition that the current system is deeply unfair and badly out of date.

Let’s put stamp duty to one side for now. Here at Vox Political, I’ve been working on a serious alternative.

If Labour really wants a progressive wealth tax that works, here’s how it could be done.

Why reform is needed

The UK’s council tax system is widely recognized as outdated, unfair, and in desperate need of reform.

Introduced in 1993 to replace the deeply unpopular poll tax, council tax is still based on property values assessed on April 1, 1991, with only minor adjustments over time.

It runs on a banded system, meaning Band A (the cheapest) starts at homes worth up to £40,000, and Band H (the most expensive) includes homes worth £320,001 and above.

While the banded system was meant to create some progressivity, the reality today is starkly different.

High-value homes in London and the south-east often pay disproportionately less relative to their actual market value than smaller properties elsewhere.

This means that in some areas, a modest home can contribute a higher proportion of its value than a mansion in a wealthy neighborhood.

For example, a Band D home in Blackpool can pay more, proportionally, than a Kensington property worth many times more in today’s market.

Council tax also undervalues modern property prices: The UK property market has undergone dramatic growth over the last three decades.

As of 2025, the average home in the UK costs between £273,000 (according to Nationwide) and £298,000 (per Halifax), far above the 1991 baseline used to determine council tax bands. The lack of regular revaluation means the system no longer reflects current wealth distribution.

Some areas see particularly extreme divergences, with London averages surpassing £500,000, making the tax effectively regressive in high-value areas.

And council tax fails to capture true wealth: By tying local government revenue to outdated property values, the council tax fails to measure residents’ actual ability to pay.

In practice, this means public services are funded in ways that do not scale with wealth, creating a mismatch between need, contribution, and fairness.

Reforming the system to target property wealth directly can make taxation more equitable and transparent.

How a progressive wealth tax could work

Government adoption of a property wealth tax would fundamentally change who contributes and how much.

Unlike council tax, a wealth tax would be explicitly designed to scale with property value, ensuring that higher-value homes contribute more annually.

Such a system would focus on equity, efficiency, and sustainability, and could replace council tax entirely while also addressing some distortions in the housing market caused by outdated taxation mechanisms.

• Equity: Those who own the most valuable properties pay proportionally more, while smaller homes face a minimal burden.

• Efficiency: Taxes on wealth are collected annually, creating predictable revenue streams for local services, rather than sporadic or outdated assessments.

• Sustainability: As property values change, tax contributions automatically adjust without the need for arbitrary re-banding or freezes.

The core idea behind the proposed tax

The wealth tax concept that This Writer is proposing focuses on property ownership as the basis for contribution.

This aligns with the principle that local services should be funded according to ability to pay.

Unlike stamp duty, which is a transactional tax levied when a property changes hands, a wealth tax is annual and stable, making it a reliable source of funding for local councils.

From an implementation standpoint:

• The tax could be levied on the market value of properties above a certain threshold, for example, £250,000 or £500,000.

• It would be progressive, with higher-value properties paying a higher percentage of their value annually.

• It would replace council tax, freeing tenants from a charge that they currently pay.

Why renters don’t need to pay

Objectors may suggest it is wrong that renters, who do not own property, would no longer contribute directly to local services.

But modern thinking (in line with Modern Monetary Theory) is that government spending does not rely on taxation. Taxes are primarily a tool to:

• Create demand for the currency (you need £ to settle your tax bill).
• Manage inflation (by draining purchasing power).
• Redistribute wealth and power (progressive vs regressive structures).
• Shape behaviour (discourage speculation, vacancy, pollution, etc.).

In this context, a property-based wealth tax primarily serves to distribute costs equitably across owners, while funding for services continues through general government mechanisms.

Renters benefit indirectly because local services are maintained without unfairly burdening them relative to property owners.

But it is important to bear in mind that if tenants don’t pay council tax anymore, they’re not “free riding” on public services. They’re just no longer the collection point for this particular tax.

The important question isn’t “are renters paying?” but: Is the system fairly redistributing burdens? And is it politically acceptable that those who own valuable property contribute more?

Services will still be funded, but the constraint would now be political (Parliament’s budget rules) and based on real resources (nurses, builders, classrooms), rather than “where the money comes from”.

Sadly, even if we (and plenty of economists) accept this framing, most of the public and media are still stuck in the “taxes fund spending” story. So the attack line may be: “Renters don’t pay, but they still get bins, roads, schools, police – this is unfair!”

Renters pay other taxes –  VAT, income tax, and National Insurance. Property tax is just better aligned if owners are directly liable. And technically, nobody “pays for” public services; the government creates the money to spend. Taxes merely redistribute and regulate demand.

The proposal: a fully-worked model for a progressive property wealth tax

Design Principles

The tax is designed to:

1. Be progressive: higher-value properties pay proportionally more.

2. Be transparent and predictable: it demands annual payments based on market value.

3. Replace council tax entirely: it frees renters from this obligation.

4. Raise sufficient revenue: the sums it raises are equal to or exceed current council tax receipts.

5. Align with ability to pay: it reflects true wealth rather than outdated banding.

Proposed property value bands and tax rates

The following structure is suggested for England, with similar principles applied to Scotland, Wales, and Northern Ireland:

Notes:

• Thresholds are illustrative; exact bands could be adjusted regionally.

• Rates are applied progressively, meaning only the portion of value within each band is taxed at that band’s rate.

• The aim is to create a smooth, transparent curve so no “cliffs” of sudden jumps in bills occur.

A worked example: annual tax by property value

Below is a table comparing average current council tax versus the proposed wealth tax, assuming a Band D council tax average of £2,200 annually.

Explanation:

• The new system is strongly progressive. Owners of modest homes pay modest amounts, often less than they currently do under council tax.

• Owners of high-value properties pay dramatically more, reflecting true wealth.

• Revenue is maintained or increased overall because contributions from top-tier properties outweigh reductions from lower-value homes.

Estimated revenue impact

Using property value distributions from Land Registry and ONS data:

• Total council tax receipts (2025) ≈ £34 billion.

• Proposed wealth tax receipts (with the above rates and bands) ≈ £36–38 billion, depending on exact property valuations.

This ensures the new system is revenue-neutral or slightly positive, making it fully capable of funding local services.

Regional and local adjustments

1. Regional Cost-of-Living Adjustments:
   Wealthier areas (e.g., London, Surrey) naturally generate higher contributions due to market values. Rural or lower-cost areas pay proportionally less.

2. Local Surcharges for Services:
   Councils could optionally levy small additional percentages for targeted local improvements, capped to prevent excessive burdens.

Administration

• Valuation updates could occur every five years using automated market data and estate agent indices.

• Owners would be responsible for annual declarations; penalties would apply for misreporting.

• Collection is simpler than council tax because it aligns with existing property records and HM Land Registry data.

Political and practical considerations

1. Public acceptability:

   • Clearly communicating that renters are not “free riding” is essential.

   • The framing should be: “Those who can afford more, contribute more; services continue for everyone.”

2. Market impact:

   • Progressive rates reduce speculative gains on ultra-high-end properties.

   • Ordinary buyers of modest homes are minimally affected, keeping home ownership affordable.

3. Equity benefits:

   • Reduces regressive burdens where smaller properties pay proportionally more.

   • Directly aligns tax with wealth, rather than outdated property bands.

Technical TL;DR

If the above was too long and you didn’t read it, here’s the gist:

• Council tax is outdated, regressive, and unfair.

• A progressive property wealth tax ensures higher-value properties pay proportionally more.

• Renters benefit indirectly; government spending doesn’t rely on their direct payment.

• The system raises at least as much as current council tax.

• It is simple, predictable, and transparent.

Revenue implications, renters, landlords, and discounts

Revenue projections

A well-designed progressive property wealth tax can be more equitable and more reliable than council tax. Using 2025 UK property market data:

Key points:

• Revenue is predictable and stable. Unlike council tax bands frozen at 1991 values, this tax automatically scales with market value.

• Overall revenue exceeds current council tax receipts. Early estimates suggest a 15–25 per cent increase in aggregate annual collections, depending on the exact thresholds and rates used.

• Because the tax is annual, local councils have consistent funding, removing the need for arbitrary rebanding or periodic top-ups.

Renters and landlords

One common concern is who actually pays for local services:

• Renters: Under this system, tenants no longer pay council tax directly. Some may see this as “free-riding,” but in practice, tenants may still contribute indirectly through higher rents, which landlords may adjust for. From a Modern Monetary Theory perspective, this is not a problem, because government spending on services does not depend on collecting taxes. Taxes instead redistribute wealth and manage demand, and do not fund spending directly.

• Landlords: Owners of rental properties are liable for the wealth tax. This aligns contributions with property ownership, and ensures that wealth, rather than occupancy, determines tax responsibility.

For example:

• A landlord owns a £1.2 million property rented to tenants. Under the proposed 0.8 per cent rate, they pay £9,600 annually, replacing council tax (previously £2,280 for Band D).

• Tenants benefit from services like bins, roads, and schools without paying council tax directly, but the landlord’s contribution reflects the property’s value.

Exemptions, reliefs, and discounts

To make the system politically and socially acceptable, several mechanisms can be introduced:

1. Primary Residence Relief: Tax is lower for owner-occupied homes, so it does not overburden families.

2. Low-Value Property Floor: Properties below a certain threshold (e.g., £250,000) pay no tax, protecting first-time buyers and lower-income households.

3. Rural/Essential Services Discount: Areas with higher service delivery costs (remote communities) could receive small reductions to account for infrastructure realities.

4. Hardship Relief: Means-tested discounts for pensioners, disabled residents, or low-income households could ensure fairness without undermining overall revenue.

5. Short-Term Ownership Adjustment: Owners who have purchased recently and paid stamp duty could receive temporary relief to avoid double taxation during transitional periods.

Predictable and transparent

A major benefit of this model is clarity:

• Homeowners can calculate their tax bill easily, based on property value and banded rates.

• Annual bills allow long-term financial planning, unlike council tax’s frozen bands or stamp duty’s one-off, unpredictable spikes.

• Local councils can plan budgets around stable revenue streams, not relying on periodic reassessments or politically sensitive rebanding.

Objections, counterarguments, and final thoughts

Common objections and responses

1. “High-value homeowners will leave the country or hide assets.”

   • While no tax is immune to avoidance, a properly enforced, national-level wealth tax with clear property valuation rules reduces loopholes. Evidence from countries with similar taxes shows that moderate rates (0.5–one per cent) on property do not drive mass emigration. Moreover, local services rely on residents, not theoretical flight, so fairness matters more than fear of avoidance.

2. “Property taxes hurt the housing market.”

   • An annual wealth tax reduces speculation by slightly increasing the cost of holding multiple high-value properties. By targeting value rather than transactions, it avoids destabilizing property purchases while still collecting fair contributions. It may even discourage artificially inflated prices for luxury properties.

3. “Calculating and collecting this tax will be complex.”

   • With modern digital valuation tools and regular market updates, annual valuations can be automated. The system is far simpler than sporadic stamp duty calculations or the outdated council tax bands frozen since 1991. Clear brackets and percentages make computation transparent and predictable.

4. “Why replace council tax at all?”

   • Council tax is regressive in many areas, outdated, and politically unpopular. A progressive wealth tax ensures equity, sustainability, and transparency, providing a reliable revenue stream that scales with actual property wealth rather than arbitrary historical bands.

Policy TL;DR: The Key Points

If all of the above was too much for you, here are the main points:

• Council tax is outdated: It is based on 1991 valuations and regressive in high-value areas.

• We need fairness: The current system does not scale with wealth; low-value properties can pay a disproportionate share.

• The proposed wealth tax is annual and property-based, with progressive rates tied to each property’s current market value.

• Revenue impact: the proposed tax is likely to exceed current council tax collections, funding local services sustainably.

• Renters do not pay directly, but indirectly contribute; the system aligns responsibility with property ownership.

• Flexibility: Exemptions, discounts, and hardship relief protect vulnerable groups while maintaining equity.

• Transparency and predictability: this tax is based on simple calculation, automatic scaling, and stable revenue.

The UK’s council tax system has long been due for a fundamental overhaul. By replacing it with a progressive property wealth tax, we can create a fairer, more transparent, and economically sensible approach to funding local services.

Key benefits include the following:

• Higher-value properties contribute proportionally more.

• Revenue is predictable and sustainable for councils.

• Renters are no longer unfairly burdened by a system tied to property ownership they do not control.

• The system encourages equity and discourages speculation without destabilizing the housing market.

But bear in mind: this proposal is just one model, designed to illustrate how a government could replace council tax with a system that is fair, effective, and progressive.

The exact thresholds, rates, and reliefs could be adjusted in consultation with experts, but the core principle remains: taxation should reflect actual wealth, not outdated 1991 property valuations.

By adopting such a system, policymakers could finally resolve a three-decade-long distortion in local taxation, creating a model that is politically defendable, economically rational, and socially equitable.