A new analysis from the Resolution Foundation warns that England’s current property taxes are quietly reshaping wealth across regions. The study finds London households pay much less in council tax and stamp duty than their property values imply, leaving households elsewhere to cover the gap.
Key findings: the scale of the London shortfall
The report calculates a hidden transfer worth £3.1 billion each year. That sum represents the gap between what London homeowners effectively pay and what a fair share would be.
Researchers say this imbalance translates into a transfer from households outside the capital toward those living in London. The pattern, they argue, is baked into how council tax bands and stamp duty are structured.
Why the system is skewed: council tax bands and stamp duty mechanics
Council tax bands in England are based on historical valuations that have not kept pace with decades of house price rises. The result is that tax burdens no longer scale with current property values.
- Council tax bands remain unchanged for many properties.
- Stamp duty is a transaction tax with large, uneven jumps at thresholds.
- Both levies interact to create incentives and distortions in the housing market.
Numbers to watch: revenue, international context and forecasts
The Foundation estimates both levies will raise around £74 billion for the Treasury by the 2030–31 tax year, under current forecasts.
Compared with other advanced economies, the UK collects more property tax. Britain currently raises about 3.7% of GDP from housing levies, versus an OECD average near 2%.
Regional impact: winners, losers and who pays more
The distortions largely favour London. Around four in five London households benefit from the present setup, according to the analysis.
By contrast, the North East is heavily penalised. The report finds roughly 85% of households there will overpay relative to a proportional property tax. The typical excess tax is about £710 a year by the end of the decade.
Across England outside London, about two-thirds of households are projected to pay more than their fair share under current rules.
Examples of inequality in tax burden
- An occupant of a £100,000 home could face a tax burden nearly three times higher, proportionally, than someone in a £1 million home by 2030–31.
- Stamp duty’s threshold jumps discourage moves and lock people into mismatched homes.
Policy proposals the Foundation recommends
The report calls for a fundamental rethink of both levies. Its headline suggestion is a single proportional property tax.
- Introduce a proportional annual property tax set at 0.7% of a home’s value.
- Design the reform to be revenue-neutral overall.
- Include rebates for low-income households.
- Offer payment deferrals for owners with high assets but low cash flow.
Stamp duty: scrap or reshape?
Authors argue stamp duty on primary residences should be abolished. But they issue a warning. Ending the transaction tax overnight would:
- Create an immediate fiscal hole of about £15 billion.
- Hand a windfall to current homeowners, widening inequalities.
- Risk short-term paralysis in the housing market if not phased carefully.
The report notes stamp duty currently discourages around 100,000 home purchases each year. That reduces mobility and blocks moves tied to work or downsizing.
Voices from the study and the political test ahead
Hannah Aldridge, a senior analyst at the Resolution Foundation, said the UK already raises more housing tax revenue than most peers. She called the two main housing levies “terribly designed, grossly unfair and economically harmful.”
“These taxes fall heaviest on those least able to afford them,” she told researchers, adding that the current system has become a hidden subsidy worth £3.1 billion for Londoners.
The Foundation urges the Chancellor to use the upcoming Budget to publish a clear roadmap for reform. It accepts the political challenge is large, but argues most English households would pay less under a fairer system.
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