Property tax alternative to stamp duty wins support of MPs

Posted on Monday, March 28, 2022

At least 18 MPs have come out in favour of a new annual Proportional Property Tax which would be levied on the current values of homes. 

The PPT, advocated by a campaign group called Fairer Share, would replace council tax, which is currently based on 1991 valuations of properties, and would replace stamp duty land tax as well.

The campaign wants the PPT introduced at a flat rate of 0.48 per cent of the property value, and describes it as new tax that would ”raise a surplus of £5.6 billion for HM Treasury and is a way for the government to overhaul a deeply regressive and unfair system.”

It is claimed that such a move could lead to bills falling for 77 per cent of the country, with the average household likely to be £556 a year better off - however, there would be substantially increased bills for almost a quarter of households.

The Fairer Share campaign says the PPT replacing stamp duty would “remove a barrier to homeownership for millions of young families and make it easier for older households to downsize. Our proposed PPT would instead spread the burden of stamp duty across 23m homes, which would mean that, instead of one large tax bill each time someone buys a home, the tax is spread across the period of property ownership.”

The MPs backing it are evenly split - nine Labour and nine Conservative. Prominent amongst the MPs are Conservative Kevin Hollinrake, the former chair of Hunters estate agency group, and Labour’s former shadow chancellor John McDonnell. There are also several Conservative, Liberal Democrat and cross-bench members of the House of Lords in favour, too, along with Labour’s Greater Manchester Mayor Andy Burnham.

The tax would include a surcharge for second homeowners and foreign owners of UK property, gathering a further £4.5 billion, advocates say. 

The campaign has commissioned a 4,000 person poll suggesting that the introduction of such a tax could determine who won the so-called ‘Red Wall’ seats at the next General Election - seats won by the Tories in 2019 and attributed with giving them a substantial majority in the House of Commons.

One of the MPs in favour - Hartlepool Conservative Jill Mortimer - writes on the Fairer Share website: “The absurdity of the council tax system is such that households in my own constituency currently pay out an average 1.31 per cent of their property’s value every year, while for residents of Westminster the council tax burden stands at just 0.09 per cent. In other words, council tax rates in Hartlepool are higher than they are for comparative bands in many other, and often much more affluent, areas of the country.

“Even with the rebates, council tax will still be a system that favours millionaires rather than the millions. By taking bolder action to minimise the pain caused by council tax, the Chancellor would be steering the levelling up agenda towards a place where it can make a real difference to voters’ wallets today rather than in a decade’s time.

“To deliver for voters in the red wall and beyond, the Government could revisit the outdated council tax banding system, which is based on 1991 prices and favours taxpayers in those areas where house prices have surged the most. This would be a much-needed step in the right direction. We should look closely at killing off council tax and replacing it with a fairer system.”

Last year the Daily Mail, citing unnamed government sources, said a version of the PPT was under consideration by the Treasury but then abandoned when it was discovered that the quarter of households paying higher bills were predominantly in Tory heartlands in the south of England.

Via @EstateAgentToday