A major shake-up of the UK property tax system is reportedly under consideration. The Treasury is exploring a move away from the current stamp duty model towards an annual property tax on homes valued over £500,000. Experts say the change could improve market fluidity, but it comes with significant trade-offs, particularly for homeowners in London and the South East.

Under the existing system, stamp duty is a one-off payment made when a property is purchased. The proposed annual tax would replace that upfront cost with a recurring charge, creating a long-term financial commitment for higher-value homeowners. Advocates argue that removing stamp duty could encourage more transactions, unblocking the market for first-time buyers and families looking to trade up. By reducing the upfront cost of purchasing a home, the housing market could become more dynamic and accessible.

However, the implications are far from straightforward. By shifting the burden from buyers to owners, the new system would particularly affect older homeowners who have lived in high-value properties for decades. For many in London, where property values routinely exceed £500,000, the proposal could mean a substantial ongoing cost on top of mortgages and living expenses. According to recent data, a significant portion of stamp duty revenue comes from the capital and the South East, meaning these regions are already disproportionately affected by property taxes. An annual levy would only amplify this effect.

Industry professionals have voiced concerns about fairness. One mortgage broker commented, “It becomes, in effect, a south-east tax. Many older homeowners could struggle to meet an annual charge on properties that have appreciated far beyond their original purchase price.” A property buying adviser added, “The potential changes are aimed at wealthier homeowners, but the wealth here is often hard-earned and spread across multiple generations. The government will need to consider the human impact of any reform carefully.”

Despite the concerns, there are potential benefits. Scrapping stamp duty could remove a long-standing barrier for buyers and movers alike, making it easier for people to enter the housing market or upsize to a larger property. A more fluid market could, in turn, stimulate economic activity and increase overall housing transactions.

Implementing such a change would be one of the most significant reforms to UK housing taxation in decades. Stamp duty, while politically convenient and revenue-generating, has long been criticized for discouraging transactions, clogging housing chains, and indirectly pushing up prices by reducing supply. Moving to an annual property tax could smooth the fiscal burden over time, but it would also place continuous financial pressure on homeowners whose property values are high on paper but not necessarily liquid in cash. Pensioners or homeowners on fixed incomes may find this particularly challenging.

For those considering buying a new apartment or home in London, the potential for tax reform adds an additional incentive to act sooner rather than later. Under the current stamp duty system, buyers know exactly what to budget for, avoiding the uncertainty of potential future annual taxes. With London’s supply of high-quality new build apartments remaining limited and demand strong, purchasing now offers both security and long-term value.

For now, the Treasury has remained cautious. “The best way to strengthen public finances is by growing the economy — which is our focus,” a spokesperson said. How or when any property tax overhaul might be implemented remains uncertain. But for buyers navigating London’s challenging housing market, understanding these proposals and their potential impact can help make informed decisions. Acting today may not only provide clarity and peace of mind but also protect against unexpected future costs.