Speculation over reform of property taxation has been ramped up over the late summer and early autumn, arguably to a degree not seen since calls for a mansion tax were doing the rounds well over a decade ago.
Given the current state of public finances, one of the overriding objectives of any such reform would have to be to raise additional tax revenues. And, as we are almost constantly reminded, that would have to come from those with the broadest shoulders, who - by lucky coincidence - happen to be living in some of the country's most expensive homes.
Proponents of reform have long pointed to the outdated basis for charging council tax, based as it is on 1991 values. The regressive nature of the tax and local rate setting mean a Band H property in Wandsworth (average value £4.05m) pays 4% less than Band B property in Rutland (average value £220,400). In isolation that isn’t a good look.
But those pushing for more tax to be borne by higher value homes rarely look at property taxation as a whole.
The complex web of different charging structures and reliefs for different taxes, make reform devilishly difficult to deliver, without unsettling the market. They also make it difficult to establish whether, in the round, the current system is fair.
What we do know is that, while council tax (arguably a local government tax that happens to be loosely based on property values) is regressive, stamp duty is highly progressive. Indeed in 2023-24 £1m+ homes generated 44% of all residential SDLT receipts, though accounting for just 3.0% of the housing market.
But a fairer comparison requires a little more mathematical wizardry.
When you spread the cost of stamp duty over 15 years – broadly the average time people own a home – and combine it with annual council tax, you get a clearer picture of what homeowners really pay each year.
Then, we can look at both stamp duty and council tax as a percentage of the value of the average property in each band.
Doing this we found that most homes in council tax bands C to H end up paying roughly the same effective tax rate – between 0.68% and 0.75% a year across England as a whole. Importantly a falling rate of council tax is effectively offset by an increasing rate of stamp duty as you go up the Council Tax Bands.
Properties in council tax bands A to B, do carry a higher aggregate charge of 1.16% and 0.85% respectively. If we needed a reminder, this shows us that the current system is not perfect, though not wholly out of kilter.
So what of the regional divide?
While council tax charges in London are somewhat lower than across the rest of the country, the current day value of properties in each band is higher, most noticeably at the top end of the market. Those higher values come with a much higher exposure to SDLT.
In London, the average property in Band H is currently worth around £5.37 million and carries an annualised combined tax cost of £40,530. This, again comes in at around 0.75% of the property’s value each year, albeit heavily weighted to the SDLT element.
So, while the current tax system is awash with imperfections and inconsistencies, in the round it isn’t quite so out of balance as we are sometimes led to believe.
This article first appeared in The I, September 2025.
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