Reeves looks at property tax to replace stamp duty

The Treasury is considering a new tax on the sale of homes worth more than £500,000 as a step towards a radical overhaul of stamp duty and council tax, the Guardian has been told.

- Anna Isaac Peter Walker

As the chancellor, Rachel Reeves, prepares the ground for tax rises in the autumn budget, senior ministers have tasked officials to study how a "proportional" property tax could be implemented and model its impact.

Officials are initially examining a potential national property tax, which would replace stamp duty on owner-occupied homes, sources said. They are also studying whether, after the national tax, a local property tax could then replace council tax in the medium term in an effort to repair battered local authority finances. No final decisions have been made.

A national tax could be implemented during this parliament, while it is understood an overhaul of council tax would take longer, requiring Labour to win a second term in office.

The policy options are being considered as part of a large tranche of work within the Treasury aimed at tapping into the vast cumulative rise in house prices in recent years that risks entrenching inequalities and making council tax more unfair.

If the plans came to fruition, they could provide valuable political cover for Reeves, both in terms of raising extra revenue without breaking Labour's pledge not to raise levies on working people and as policies that would be likely to appeal to many of the party's MPs and members.

Pressure on the chancellor to consider more wealth-based taxes has increased and the additional tax on more expensive homes could be presented in this light.