London could face a £7.5 billion increase in property taxes under a proportional property tax backed by Prime Minister Andy Burnham, with the capital expected to fund tax cuts elsewhere in the country. The proposed reforms would replace council tax and stamp duty with an annual levy based on property values, leaving many London homeowners paying significantly more each year. Critics argue the plans would unfairly burden London residents.
The article below by Nicholas Cecil is in the Standard, and you can read it here.
London faces £7.5billion tax bombshell from new property levy backed by Andy Burnham
Exclusive: The capital would be the only region funding a new proportional property tax which would benefit the rest of the country
A new property tax backed by Andy Burnham would rake in an estimated £7.5billion from London if it is introduced.
Mr Burnham is set to become Prime Minister, possibly within weeks, after Sir Keir Starmer’s resignation statement on Monday.
As the former Greater Manchester Mayor heads to No10, millions of people across the country, including in the capital, are trying to work out what a Burnham premiership could mean for them.
He has supported the Fairer Share Campaign for a proportional property tax (PPT) to replace council tax and stamp duty.
The new levy would be based on 0.48% of the value of a property, or 0.96% for second homes, empty properties and those owned by foreign nationals.
“If you live outside London...your community will benefit from an overall £6.5billion reduction in property taxes, representing a huge boost to local economies,” the campaign states in its manifesto published in 2021.
The new tax proposal is fiscally neutral so London would fund the benefits to other regions and the updated £6.5billion figure is estimated to be around £7.5billion now.
Hundreds of thousands of Londoners could see their property tax bill rise by £1,000, with many more seeing smaller increases.
Given that only London would pay more under the reforms, they are likely to face significant opposition in the capital.
The campaign estimates that the owner of a £700,000 property would pay £3,360 in PPT and that is around the same level of council tax for a property of that value.
Owners of more expensive properties would end up paying more in property tax with a PPT, and those with homes worth less would see their bill fall, though, this depends on the level of council tax which varies significantly across London.
These figures do not take into account the benefits of an end to stamp duty.
Any rise in property tax, if the PPT was introduced, would initially be limited to £1,200.
The campaign says around £5 billion would be raised from the 0.96% levy on second homes, those owned by foreign nationals and empty housing, with the bulk of this coming from London.
Andrew Dixon, chair of the campaign, told The Standard: “Council Tax is unfair, Stamp Duty is economically damaging, and Londoners pay the price for both.
“Fair reform means lower bills for low and middle-income households, protection for those facing increases, and a higher contribution from empty, second and overseas-owned homes.”
He sought to argue: “This is a pro-London reform because it tackles the parts of the property market that Londoners complain about most: empty homes, speculative ownership, punitive moving costs and unfair Council Tax bills.”
However, if a PPT was brought in it is likely to face a major backlash in London given so many people in the capital would see their property bills rise.
Many Londoners have large mortgages given the high cost of property in the capital.
House prices have fallen for the ninth month in a row recently.
Mr Burnham has previously backed a land value tax, and the PPT while not a pure land value tax, is a variation on it based on property values.
He is listed as a supporter on the Fairer Share Campaign website.
In 2010 when he first attempted to become Labour leader, he said: “The LVT, an annual tax on the market rental value of land, would allow for the abolition of stamp duty - a tax on the aspiration of young people to put down roots and get on with life.”
More recently, he has repeated his calls for reform. “I’ve long been persuaded of the argument for a Land Value Tax,” he said. “[Council tax] is a highly regressive tax. I see a big case for land and property and business taxation to be changed.”
Property experts doubt that Mr Burnham would push ahead with such a major reform before the next general election, expected in 2029, but believe it could form part of Labour’s manifesto.
