Property Possible changes to stamp duty and council tax

The government is considering a new national property tax as the first step towards a radical shake-up of stamp duty and council tax.

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The discussions taking place at the Treasury - revealed in yesterday's Guardian - have already prompted much debate and, perhaps inevitably, an outcry in some quarters.

What are they considering? Two things, essentially. First, sources said Treasury officials were initially examining a potential new tax that would replace stamp duty on owner-occupied homes. It would be paid by homeowners on properties worth more than £500,000 when they sold them. The amount paid would be determined by a property's value. Such a change would be a big deal because under the current system stamp duty is paid by buyers, not sellers. It could be a bigger concern for some people living in London, the south-east and other areas where property prices are particularly high.

Second, officials are also said to be studying whether, after a national tax was brought in, a local property tax could then replace council tax in the medium term. While a new national property tax could in theory be implemented during this parliament, overhauling council tax would take longer and would almost certainly require Labour to win a second term.

How does stamp duty work, and what's wrong with it? You must pay stamp duty land tax (SDLT) - to give it its full name - if you buy a property over a certain price in England and Northern Ireland. There are different approaches to some land taxes in Wales and Scotland.

Stamp duty rates vary depending on whether someone is a first-time buyer, and are banded in steps upward depending on the value of the property. They can also vary as a result of stamp duty "holidays" benefiting some buyers that are brought in from time to time.