Chancellor Rachel Reeves is weighing up a major change for the Autumn Budget: replacing stamp duty with a new property tax. Here’s what’s on the table — and crucially, what it means if you’re a property investor.
The proposals in a nutshell
Stamp duty replacement: A proportional property tax, payable on sales of homes over £500k. Unlike the current stamp duty regime, this would affect around 20% of transactions, rather than 60%.
Council tax overhaul: An eventual shift to a local, annual property tax based on current property values, finally replacing outdated 1991 council tax bands.
Capital gains reform: Potential removal of the primary residence exemption for homes above £1.5m, which could mean CGT rates of 18–24% even on your main home when sold.
Why investors should pay attention
Property investors sit at the intersection of all three reforms — and the ripple effects could be big:
Market activity & liquidity
A move away from heavy upfront stamp duty could increase transaction volumes, making it easier to buy and sell property without a huge cash hit at purchase but uncertainty over thresholds (e.g. £500k) may stall deals short-term, especially in London and the South East.
Holding vs. trading strategies
If an annual property tax linked to value is introduced, the economics of holding long-term could change. Investors with high-value assets may see their yearly costs rise significantly, impacting yield.
For leveraged investors, higher ongoing costs could tighten cashflow. Expect more scrutiny of ROI and potential pressure to rebalance portfolios towards higher-yielding regions.
Tenant demand & rent levels
If costs rise for landlords, some will look to pass these on through rents. But local markets will dictate how much is possible without pricing tenants out.
A shift to proportional property taxes could also encourage downsizing, releasing more family homes into the rental and sales market — which might impact tenant demand dynamics.
Exit strategies & capital gains
For those planning to sell high-value properties, capital gains reform could bite into profits. This may accelerate some investors’ exit plans before changes are confirmed.
On the flip side, if stamp duty is scrapped, selling to owner-occupiers could become more attractive, as buyers face a lower upfront barrier.
What investors should be looking out for
The Autumn Budget (expected late October/early November) — this is when we’re likely to see clarity on stamp duty reform.
Regional implications — properties in London and the South East will be hardest hit by any £500k+ threshold. Northern investors with lower-value stock may actually benefit.
Portfolio strategy — investors need to revisit models: factoring in not just purchase taxes, but potential annual levies and changing exit taxes.
Key takeaways for you as a property investor
For investors, Reeves’ proposed reforms are a double-edged sword:
Positive: lower entry costs could stimulate activity and open up new opportunities.
Negative: higher ongoing costs and CGT changes could hit long-term profitability.
The winners will be those who stay agile — re-running their numbers, considering regional diversification, and being ready to act fast once the details are confirmed.