Londoners Underpay £3.1bn in Property Tax, Think Tank Finds

Households in London pay £3.1bn a year less in property tax than the value of their homes would suggest. The rest of England makes up the difference. That’s the central finding of new research published by the Resolution Foundation on 24 September. The think tank traces the gap to one fact: council tax bills still rest on property values from 1991.

Since 1995, prices have risen 7.3-fold in Inner London and 4.2-fold in the North East. By 2030-31, a £100,000 home will pay almost three times the tax rate of a £1m home. Some 85% of North East households will overpay, by £710 a year on average. Eight in ten London households will underpay, by about £950.

Property taxes brought in 3.7% of the UK’s GDP in 2023, against an OECD average of 2%. Council tax and the main rate of stamp duty in England are set to raise £74bn by 2030-31. The foundation’s quarrel is with how that burden is shared. Stamp duty alone prevents around 100,000 house purchases every year, its press release says.

One tax at 0.7%

Under the foundation’s plan, council tax and stamp duty would go. In their place would come a tax of 0.7% of a home’s value, paid by occupiers, with a rebate for poorer households. Bills would be deferred for people who are asset-rich but cash-poor, and changes would be phased in.

Hannah Aldridge is a senior research and policy analyst at the foundation. “Our housing taxes fall heaviest on those least able to afford them and have turned into a huge £3.1 billion subsidy for those living in London,” she said.

England has no up-to-date register of home values, and the foundation says building one would take at least two years. It warns that simply announcing the end of stamp duty would stall sales and hand owners a windfall. That would also open a £15bn hole in the public finances.

The mansion tax already on its way

From April 2028, owners of English homes worth £2m or more will pay a High Value Council Tax Surcharge. The annual charge runs from £2,500 for homes worth £2m to £2.5m, up to £7,500 above £5m.

Ministers say fewer than 1% of homes will pay. The Office for Budget Responsibility expects about 165,000 homes to pay in 2028-29, and the government puts the yield at around £430m a year. Launching the consultation in May, Exchequer Secretary Dan Tomlinson described the unfairness it targets. “A Band D home in parts of the North can face a higher annual council tax bill than a property worth many millions of pounds in parts of central London.”

The consultation closed on 14 July. HMRC plans to value homes using AI and public sales data, and owners will get about six months to challenge their valuation. The Times has reported that the Treasury is weighing a lower £1.5m threshold, which would cover about 271,000 homes. A Treasury spokesperson said tax decisions are for the chancellor to set out at fiscal events. John Healey delivers his first Budget as chancellor on 28 October.

The surcharge revalues the top 1% of homes and charges their owners, leaving everyone else on the 1991 bands. The foundation would revalue every home and charge the people who live in them.

How other countries tax the most expensive homes

France levies an annual tax on net property wealth above €1.3m. Rates rise from 0.5% to 1.5%, and a main home gets a 30% discount on its value.

In Los Angeles, Measure ULA has taxed high-value sales since April 2023. It charges 4% on sales between $5.3m and $10.6m, and 5.5% above that. It passed $1bn in revenue from 1,435 sales by January 2026. Nearly 74% of its 2025-26 budget goes to affordable housing.

A 2025 study by the UCLA Lewis Center found the odds of a sale above the threshold fell by about half. Sales of commercial and apartment buildings fell too. The Resolution Foundation makes the same criticism of stamp duty.

Taxing value, land and empty homes

In 2012 the Australian Capital Territory began a 20-year programme to replace stamp duty with annual rates. It scrapped insurance duty in 2016. Under its 2026-27 budget, first home buyers pay no stamp duty at all from 1 July 2026.

In neighbouring Victoria, a commercial or industrial site sold after July 2024 pays stamp duty one last time. Ten years later it moves onto an annual tax of 1% of land value. Because the switch happens one sale at a time, no owner faces a sudden new bill.

Since 2024, Danish homeowners have paid property value tax of 0.51% of their home’s value in new public assessments. The rate rises to 1.4% above about DKK 9m. Each assessment is cut by 20% before tax is worked out, as a buffer against errors in mass valuation. Any English revaluation would face the same risk.

In Singapore, owner-occupiers pay progressive tax on a home’s annual rental value, from 0% on the first S$12,000 to 32% above S$140,000. Homes that owners don’t live in pay between 12% and 36%, so investors carry more of the load.

Vancouver’s Empty Homes Tax charges 3% of assessed value on properties left vacant. In 2024 vacancies fell below 1,000 for the first time since the tax began in 2017. It has raised C$194.3m for housing.

Older owners and tighter budgets

In a September 2025 referendum, 57.7% of Swiss voters backed scrapping the tax on the notional rent owners pay themselves. It ends in 2029, and cantons may tax second homes to fill the gap.

On UN projections, people aged 65 and over will outnumber children under 18 by the late 2070s. More owners will be asset-rich but cash-poor, which is why the foundation’s plan lets them defer their bills.

The OECD’s interim outlook on 23 September described energy shocks, inflation above target and fiscal strain across many countries. Budgets have already been stretched by fuel tax cuts and other cost of living support.

Global shocks, the rising cost of living, more retired people and strained public finances make the right answer hard to find. They also make the current system harder to defend. The ACT, Denmark and Vancouver show that property tax can be rebuilt in stages, with protections for the people who’d lose most. Resetting it in England will take more imagination and innovation than a surcharge on 1% of homes. The Budget on 28 October will show whether the government plans to revalue the top 1% of homes, or the other 99% as well.