Refactoring Property Tax: Replacing Council Tax and Stamp Duty with an Annual Levy

Across the UK, there exist two different sets of taxes based on property value. Council tax and transaction taxes such as Stamp Duty raise approximately £61.6 billion per year, and as such, there is little political appetite to replace them, despite their flaws. Council tax is particularly regressive due to a banding system, in which the amount owed has no proportional relationship with the current property value. Across Great Britain, council tax bands have not been updated since 2003 in Wales and 1991 in England and Scotland. The paper proposes a 0.75% annual levy based on property value. This property value would either be based on the value at purchase or on using an AVM to maintain an accurate valuation. The AVM revaluations would be performed every three years. The proposal is designed to be broadly revenue-neutral; however, it does generate a surplus of over £2 billion. The modelling showed that across England, Scotland, and Wales, the only group to face increased costs due to the levy were first-time buyers in mid-priced properties. As such, approximately £700 million of the surplus has been allocated to support first-time buyers with a 0% rate in the first year of ownership. The proposal also includes an escalation mechanism to target owners of multiple properties and a deferral mechanism to protect the most vulnerable.