Proportional property tax is not the way to reform stamp duty and council tax.

About a week ago on Twitter I came across an excellent Spectator article by South Cambridgeshire MP Anthony Browne about proposed reforms to council tax and stamp duty land tax. One of the proposals being mooted is by Fairer Share who want to abolish the aforementioned taxes for a proportional property tax. Under their scheme all property owners would pay 0.48% of the value of their property value annually. Renters would be exempt from the tax and according to Fairer Share about 75% of property owners would have a lower annual tax liability. However, an unlucky 25% would see substantial rises. The increase against council tax would be capped at £100 a month/£1200 per annum. For those unable to pay, the outstanding liability can be deferred for when the property is sold.

I have several issues with Fairer Share’s proposals. Firstly It assumes that anybody living in a larger house can afford a whopping tax hike and, in my opinion, will be very damaging to the property market. Under their proposed scheme only those living in more valuable properties will be hit by substantial tax increases. What they haven’t taken into account is that a large percentage of homeowners who live in big houses may have limited income and unable to pay such a massive increase over their current Council Tax bill. Secondly, many owners have already paid stamp duty when they purchased their property so why should they be clobbered again? £1200 liability accrued over 10 or 20 years – no thank you very much!

Fairer Share’s approach to property ownership could force many elderly and vulnerable home owners to sell their main asset only to end up renting to avoid the paying the very tax that caused them to move in the first place. Also why shouldn’t renters pay tax as well? They don’t have to pay stamp duty and they empty their bins and use local amenities just as much as the rest of us.

Property ownership is an aspiration to be encouraged, but if Fairer Share have their way it will put a big dampener on the property market. We all pay plenty of tax as it is so why shouldn’t there be some reward for hard working people at the end of the day?