A Shift in the Tax Landscape

If introduced, it would replace Stamp Duty Land Tax (SDLT) – a system where buyers shoulder the cost – with a levy on property sellers whose homes sell for more than £500,000.

For first-time buyers and families seeking larger homes, this change could mean a more affordable and fluid housing market. But for older homeowners considering downsizing, and for policymakers keen to stabilise tax revenues, the implications are far more complex.

Benefits for Buyers and Workforce Mobility

Heather Powell, Partner and Head of Property &  Construction, highlights the potential upside:

If Stamp Duty Land Tax (SDLT) is replaced by National Property Tax, a tax paid by the seller on the sale of a home worth more than £500,000, the costs of buying a property will significantly reduce for first time buyers whose first home costs more than £300,000 and families working their way up the property ladder. This is likely to make it easier to move house, and thus help create a more mobile workforce, able to relocate to areas where there are jobs.

At present, SDLT is widely seen as a barrier to moving, especially in high-cost regions such as London and the South East. Shifting the burden to sellers could unlock more transactions, increase labour market flexibility and support economic growth.

Downsizers in the Firing Line

But the policy is not without casualties. Downsizers – particularly those seeking to release equity for retirement or estate planning – may face new tax burdens.

However the imposition of a selling tax, at a rate still to be set by the Government, is a massive disincentive for anyone looking to downsize, especially if they are managing their estate to ensure that they will not have a liability to Inheritance Tax. Why would parents volunteer to pay a Property Tax on the sale of their property, and reduce the legacy they leave their children?

This raises a potential contradiction: while the policy aims to free up larger homes for families, it could discourage the very households the Government hopes will downsize.

Uncertain Design, Market Distortions Ahead

The details of the NPT remain unclear. Will the tax apply only to the value above £500,000, or to the full sale price once the threshold is passed? Powell notes either approach could create “cliff edges” that distort prices around the cut-off point.

The National Property Tax will see the end of the principal that no tax is payable by the seller on the sale of their family home – the much loved ‘Principal Private Residence’ tax relief. The new tax may not be called Capital Gains Tax, and indeed will not be payable on any profit made by the home owner, it is payable on the selling price, but will create a tax payable by the seller when a property is sold.

Revenue Pressure on the Exchequer

The Government will also need to balance housing policy goals with fiscal realities. Currently, SDLT raises £11.6 billion annually. Only around 20% of property sales are expected to fall under the NPT, compared with 60% under SDLT. This implies a much higher tax rate per transaction may be required to keep revenues stable.

The top rate of SDLT for a UK buyer of their family home is currently 12%, will the National Property Tax need be levied at a higher rate to maintain tax receipts?

The Treasury faces a difficult trade-off: lower transaction volumes could erode the tax base just as the Chancellor is contending with a £40 billion budget shortfall.

Wider Reform on the Horizon?

Some argue that broader reforms such as replacing Council Tax with a Local Annual Property Levy linked to property values could offset distortions created by NPT. But, this is politically unlikely in the short term. In the meantime, the risk of a housing market slowdown looms, especially in higher-value regions.

The immediate result of the introduction of a National Property Tax is likely to be a significant slowing down of the property market, particularly in the South East where the average price of family homes is over £500,000, and a drop in the tax revenues collected by the Government. Not the answer the Chancellor needs when trying to fill the £40bn black hole in her budget.

Why It Matters

For businesses, the proposed tax could influence employee mobility, recruitment, and housing affordability in key regions. For individuals, it reshapes the economics of buying, selling, and passing on property wealth.

The debate around NPT highlights a broader challenge: how to design a fair and sustainable property tax system that supports both housing mobility and fiscal stability. Businesses and households alike should watch closely – the outcome will not only affect the housing market but also the wider economy.

What you should consider / do next

The introduction of a National Property Tax (NPT) would represent one of the most significant shifts in UK property taxation for decades. While the details remain uncertain, both businesses and individuals should start considering the potential implications:

Homeowners and prospective buyers – consider how future tax liabilities may affect your buying or selling decisions, particularly if you are looking to step onto the housing ladder, upsize, or downsize.

Business leaders and HR teams – think about how changes in mobility and affordability could affect recruitment, retention, and workforce planning in regions where property values are high.

Investors and developers – assess the potential impact on housing demand, transaction volumes, and longer-term returns.

As with any significant tax reform, early awareness and scenario planning will be key.

If you’d like to explore how these proposals could affect you, your family, or your business, please speak to your usual Blick Rothenberg contact or Heather Powell using the form below.