No. 2026-24 - Property tax reform in England: a fresh look

Abstract:

The Starmer government’s 2025 Budget introduced the government’s High Value Council Tax Surcharge (HVCTS), which is an addition to an unchanged Council Tax. It is designed to apply on the amount of value above £2m and the Valuation Office Authority has been tasked with finding and valuing those properties. The VOA has proposed it will initially trawl through homes it estimates to be worth more than £1.5m to winnow out those worth £2m on more refined estimates. The HVCTS is planned to become live in 2028 but was subject to a public consultation, which concluded in July. As I argued in the Financial Times in January this year, Muellbauer (2026a), the design of the HVCTS is seriously flawed: it retains the principle of price bands, and associated cliff-edges, and caps the amount of tax collected at the upper end of the market. The other problem is leaving Stamp Duty in place for those properties, not taking the opportunity for joint reform, so missing the efficiency gains from the reduction in market frictions. Andy Burnham has signalled a major shift in the focus of policy towards reducing regional and generational inequality, improving housing affordability while boosting growth, an agenda a joint reform of the HVCTS, combined with a cut in Stamp Duty would advance - and raise significantly more revenue than Rachel Reeves’ version of HVCTS.