The Mansion Tax is no substitute for fixing Britain’s broken property tax system

As the usual Budget speculation rumbles on, most of the debate focuses on potential tax rises and the need to keep borrowing costs under control. But households are weighing up their own finances too. Not enough is said about whether the taxes people already pay are fair, or how reform could leave struggling households better off. Property tax reform is an obvious opportunity. Council Tax bands are set based on property valuations from 1991, meaning taxpayers in many lower-value properties pay proportionally more in property tax than those living in mansions in Westminster.

However, the Government’s planned Council Tax surcharge, commonly known as the ‘Mansion Tax’, would ask owners of the most expensive homes to pay more without reducing the disproportionate bills faced by households in less valuable properties. Andy Burnham has promised to confront long-neglected problems and deliver greater fairness to places that have been left behind. At this Budget, the Government can begin to fulfil that promise by announcing a full, independent review of Council Tax and Stamp Duty.

The cost of doing nothing is becoming harder to ignore. New WPI Strategy modelling for Fairer Share suggests that, if the past decade’s trend continues, average annual Council Tax bills for Band A homes could rise by over £900 to £2,500. With more than six million homes falling into Band A, historically the least expensive properties, these increases would put further pressure on many low- and middle-income households already struggling with the cost of living.

Meanwhile, average annual bills for Band D homes, the Government’s benchmark, could reach £3,750, an increase of £1,360 a year. While these projections depend on future trends, they demonstrate the potential consequences of leaving the current system unchanged. Government inaction will only exacerbate the problem for households struggling with rising costs. Bills already bear too little relation to what homes are worth today, and this problem will only get worse.

And with 1.4 million low-income households in Council Tax arrears and over £9 billion in outstanding Council Tax debt, councils are teetering on the edge of bankruptcy, unable to spend on anything other than their core functions. The system is on the verge of collapse. The ‘Mansion Tax’ will not be enough to prevent that crisis, and someone struggling with Council Tax will find little comfort in knowing a more expensive home faces an additional charge while their own bill keeps rising.

Fairer Share has long argued for replacing Council Tax and Stamp Duty entirely with a Proportional Property Tax, charged annually at 0.48% of a home’s current value. Our modelling suggests that 77% of households would pay less, with average annual savings of £556. Designed to be revenue-neutral overall, this would redistribute the burden more fairly and provide a stable footing for local government funding. It would also remove Stamp Duty, a tax that penalises homeowners when they move and disincentivises younger generations from stepping onto the housing ladder.

In London and the South East, where property prices are above average and the housing market is struggling, abolishing Stamp Duty would provide a much-needed boost, making it easier for people to move and supporting wider economic growth. Politicians have dithered over the issue for years, fearing a public backlash. However, our polling suggests these fears are unfounded. Polling by JL Partners shows that support for a Proportional Property Tax exceeds opposition by at least two to one among voters for every major party in England.

Labour voters back it by 59% to 9%, Reform voters by 48% to 14%, and Conservative voters by 43% to 21%. Homeowners also support it by more than two to one. That does not remove the need to get the details right. A review should examine valuations, protections and the transition to a new system, as well as alternative models. It would allow the Government to test the evidence before deciding how best to proceed. But fear of difficult decisions cannot justify leaving households exposed to another decade of rising, unfair bills and leaving local government in limbo.

The public is willing to consider a different approach. The Chancellor should begin that work. ____________________ Andrew Dixon is the Founder of Fairer Share. LBC Opinion provides a platform for diverse opinions on current affairs and matters of public interest. The views expressed are those of the authors and do not necessarily reflect the official LBC position. To contact us email opinion@lbc.co.uk