A radical proposal to replace Britain’s complex property tax system with a single land tax has received unprecedented support from both sides of the political divide.
The idea, which echoes an early 20th century proposal from Winston Churchill and David Lloyd George, would see council tax, stamp duty and business rates abolished in favor of a fixed annual tax on land values.
The concept has attracted support from unlikely allies ranging from John McDonnell, Labour’s former shadow chancellor, to Tim Leunig, a former adviser to Rishi Sunak. Campaign group Fairer Share is rallying MPs and peers from all parties to push Chancellor Rachel Reeves to consider the reform, which advocates say could boost economic growth and provide much-needed revenue to the Treasury.
The proposal suggests that taxing land instead of real estate could help address inefficiency and inequality in the current system. For example, council tax rates are still based on 1991 property valuations, leading to significant regional variations. In wealthier areas such as Westminster, residents pay much less council tax than residents of more deprived regions such as Hartlepool.
The proposed land tax would be a flat rate, possibly 0.48% of a house’s value, applied across the country. Analysis from Fairer Share shows that while 77% of homeowners would benefit from lower taxes, wealthier areas such as Kensington and Wimbledon would see higher bills. To ease the transition, the group has proposed limiting additional costs for wealthier households until they move, at which point they would benefit from paying no stamp duty.
Despite its appeal, the proposal is not without risks. Critics warn that a land tax, if introduced too quickly, could lead to a significant fall in property prices, especially in affluent areas, and potentially destabilize the housing market. Yet the idea is gaining ground, as both left and right recognize the inefficiencies of the current system.
Advocates argue that now is the time for bold reforms. With Labour’s huge majority and growing support across the political spectrum, advocates such as Charles Goodhart, a former Bank of England economist, believe Rachel Reeves has “the best chance since Lloyd George” to make this happen.
Yet there are doubts about whether the Chancellor will seize this moment. Although Labour’s manifesto made no mention of a land tax, growing pressures and the need for economic growth could make this radical idea more attractive as Reeves tackles the challenges of filling a £22 billion hole in the public finances.
Whether or not this proposal becomes reality, the debate signals a significant shift in the way Britain could approach property tax in the future, with potential long-term effects on the economy and the housing market.