Prime Minister Andy Burnham has moved quickly to dismiss reports that his Government is preparing to abolish council tax and stamp duty and replace them with a single annual property tax.
However, that denial is unlikely to end the discussion.
Burnham has previously supported fundamental reform of property taxation, while the Government has already introduced the principle that some residential property taxes should be paid by owners rather than occupiers.
For landlords, the important question may therefore be less about whether council tax will disappear immediately and more about whether Britain is gradually moving towards a system in which property owners carry a greater share of the annual tax burden.
What has Andy Burnham ruled out?
Reports had suggested that the Government could consider replacing council tax and stamp duty with an annual charge based on the current value of each property.
Burnham has now said that such a wholesale replacement “won’t be happening” and that there are no active plans to introduce it.
That is a significant clarification. Landlords should not treat the proposed system as confirmed government policy, and there is currently no published legislation, implementation timetable or agreed tax rate.
Nevertheless, the Prime Minister also continues to argue that the existing tax system is unfair. That leaves open the possibility of more limited reforms, revaluations, additional bands, owner-paid surcharges or changes introduced later in the Parliament.
Why is council tax under pressure?
Council tax in England is still largely based on what a property would have been worth on 1 April 1991.
This means homes that have experienced dramatically different increases in value over the past 35 years can remain in broadly similar tax bands. Critics also argue that households occupying relatively modest homes can pay a higher percentage of their property’s value than owners of significantly more expensive properties.
There is therefore a widespread view among economists and policymakers that council tax requires reform.
The disagreement is over what should replace it, who should pay and whether reform should be revenue-neutral or used to raise additional money.
The model Burnham previously supported
Much of the present concern relates to proposals promoted by the Fairer Share campaign.
Its proportional property tax model would replace council tax and stamp duty with an annual charge equal to 0.48% of a property’s current value.
Crucially for the private rented sector, liability would sit with the property owner rather than the tenant.
Under that model, the approximate annual charge would be:
- £960 on a property worth £200,000
- £1,440 on a property worth £300,000
- £2,400 on a property worth £500,000
- £4,800 on a property worth £1 million
The campaign argues that most households would pay less overall, particularly because stamp duty would be abolished. It also accepts, however, that landlords could seek to recover some or all of the new cost through higher rents.
For landlords, the removal of stamp duty would undoubtedly reduce the cost of purchasing properties.
But that benefit would be received only when a property was bought. The annual property tax would continue every year for as long as the property remained in the portfolio.
A landlord who was not planning to buy further properties could therefore face the additional annual cost without receiving any meaningful benefit from the abolition of stamp duty.
Moving liability from tenants to landlords
In most conventionally rented properties, the resident tenant is currently liable for council tax. Landlords usually become responsible during empty periods and in certain categories of property, including many houses in multiple occupation.
An owner-paid property tax would fundamentally change that arrangement.
A landlord with ten properties valued at £250,000 each would face an annual liability of approximately £12,000 under a flat 0.48% model.
That would be a direct operating cost attached to the portfolio, regardless of whether:
- the properties were fully occupied;
- tenants paid their rent;
- repairs had increased;
- mortgage costs had risen; or
- the landlord was making a meaningful taxable profit.
Unlike income tax, the charge would not necessarily bear any relationship to the income or profitability generated by the property.
That distinction matters. Property may be valuable on paper while producing a relatively modest rental yield.
The precedent has already been established
The idea of making property owners responsible for an annual housing tax is not entirely theoretical.
From April 2028, the Government intends to introduce the High Value Council Tax Surcharge in England. It will apply to residential properties valued at £2 million or more, with the owner rather than the occupier responsible for payment.
Existing council tax will continue to be charged separately.
The surcharge is initially aimed at approximately the most valuable 1% of homes. However, its importance goes beyond the number of properties affected.
It establishes the administrative and political principle that an annual residential property charge can be:
- calculated using a current property valuation;
- billed to the owner;
- collected through local authorities;
- charged in addition to council tax; and
- applied whether the owner occupies the property or lets it to somebody else.
Once a valuation and collection system has been created, future governments could potentially extend the model to lower-value properties or introduce additional bands.
That does not mean expansion is inevitable. It does mean the practical machinery for an owner-paid property tax is already being developed.
What could realistically happen next?
A complete abolition of council tax appears unlikely in the immediate future following the Prime Minister’s intervention.
More realistic possibilities include the following.
A council tax revaluation
England could follow Wales by reassessing properties using more recent values.
Wales has already legislated for a council tax revaluation in 2028, followed by further revaluations every five years. Although the intention is for the initial exercise to be revenue-neutral overall, individual properties will still move between bands and some households will pay more.
An English revaluation would create winners and losers, particularly where property values have increased much faster than the national average.
Additional council tax bands
The Government could add more bands at the top of the existing system rather than replace council tax completely.
This would be politically easier than introducing an entirely new national property tax, although it could disproportionately affect landlords in London, the South East and other high-value areas.
Expansion of owner-paid surcharges
The High Value Council Tax Surcharge could eventually be extended below its initial £2 million threshold.
The Government could also create separate charges for second homes, empty homes, holiday accommodation or additional residential properties.
A hybrid system
Council tax could remain payable by occupiers while landlords face an additional owner levy.
For landlords, this could be the most damaging option because it would not remove an existing cost from tenants. It would simply add another cost to the provision of rented housing.
Greater local tax-raising powers
Burnham has long argued for more fiscal power to be devolved to regional and local government.
Greater local freedom could produce different property-tax arrangements across England, with mayors or councils given powers to introduce supplements, premiums or locally determined levies.
That could make operating across several council areas considerably more complicated for portfolio landlords.
Would landlords simply increase rents?
Where landlords are permitted to set rents according to market conditions, a new annual property tax would inevitably become part of the calculation.
However, landlords cannot automatically pass every additional pound of taxation to tenants.
Rents are ultimately constrained by local wages, housing supply, tenant affordability and competition between properties.
In stronger rental markets, at least part of the tax would probably be reflected in higher rents over time. In weaker markets, landlords might have to absorb more of the cost through reduced yields.
Some could respond by selling, particularly where the combination of taxation, mortgage costs, regulation and maintenance made continued letting commercially unattractive.
That could reduce the supply of rental homes and place further upward pressure on the rents charged by the landlords who remained.
The effect on property values
A substantial recurring tax attached to ownership could also affect capital values.
Purchasers generally calculate what they can afford by considering both the purchase price and the ongoing cost of ownership. A property carrying a large annual tax liability may therefore become less attractive unless its asking price falls to compensate.
The effect would not be evenly distributed.
High-value, low-yield rental properties could be particularly exposed. A London landlord receiving a gross yield of 3% or 4% could find that a value-based annual tax consumes a significant share of rental income before mortgage interest, repairs, insurance, management costs and income tax are considered.
Properties in lower-value areas might face smaller bills, although landlords with larger portfolios could still experience a substantial aggregate cost.
Could the abolition of stamp duty help landlords?
Removing stamp duty would improve market mobility and lower the upfront cost of investment.
It could make it easier for landlords to:
- restructure portfolios;
- sell underperforming properties;
- purchase higher-yielding homes;
- move investment between regions; and
- acquire properties that require refurbishment.
However, landlords already pay an additional-property stamp duty surcharge when purchasing residential investments. Any reform would need to confirm whether that surcharge would also disappear.
A system that removed ordinary stamp duty but retained a landlord or additional-property surcharge would offer investors far less benefit than the headline proposal might suggest.
There is also a broader question of timing. A landlord could pay hundreds of thousands of pounds in owner taxation over several decades in return for avoiding a one-off tax on a future purchase that may never take place.
England, Wales, Scotland and Northern Ireland could diverge
Council tax and property transaction taxes are partly devolved, meaning the UK is unlikely to move towards one uniform system.
Wales is already proceeding with revaluation. Scotland has its own council tax arrangements and Land and Buildings Transaction Tax, while Wales operates Land Transaction Tax.
A major English reform could encourage the devolved governments to make different changes of their own.
Landlords operating across borders may therefore face separate valuation dates, liability rules, surcharges, reliefs and reporting obligations.
What should landlords do now?
There is no justification for restructuring a property portfolio solely because of an unconfirmed tax proposal.
However, landlords should begin considering how vulnerable their portfolios would be to an annual owner-paid charge.
Useful questions include:
- What is the current market value of each property?
- What would a charge of 0.25%, 0.48% or 0.5% cost annually?
- Which properties have the lowest net yield relative to their value?
- Could rents realistically absorb some of the cost?
- Would high-value, low-yield properties remain commercially viable?
- How would the tax affect limited company cash flow?
- Could the cost be deducted when calculating taxable rental profits?
- Would lease agreements allow any part of the charge to be recovered?
- Would properties in different parts of the UK be treated differently?
Landlords should also pay close attention to the design of the High Value Council Tax Surcharge. Even where their properties fall below the initial threshold, its valuation, billing, deferral and enforcement arrangements could provide a blueprint for wider reform.
A denial is not the end of the debate
The Government is not currently proposing the immediate abolition of council tax and stamp duty.
That should be clearly acknowledged.
But council tax remains politically vulnerable, the Prime Minister has previously supported substantial reform, and an owner-paid residential property surcharge is already due to begin in England in April 2028.
The biggest risk for landlords may not be one dramatic announcement.
It may be a gradual shift in which liability moves from occupants to owners, more properties are brought into current-value taxation and additional annual charges become a permanent feature of owning rental property.
Any government considering that route must recognise that landlords do not operate in isolation from tenants.
Taxes imposed on rental property ultimately affect investment decisions, rental supply, portfolio values and, wherever the market allows, rents.
A property tax presented as a way of making ownership fairer could therefore make renting more expensive—and further reduce the number of homes available to tenants.
NetRent does not provide legal, financial or tax advice. This article represents our general understanding of current proposals and publicly available information and is provided for information only. No wider replacement of council tax has been announced, and future policy may differ substantially from the models discussed.