London Is About to Start Taxing Property Like America
Burnham takes office this month. Buy now — The day the reform is announced, the discount is gone.
Andy Burnham wants to scrap stamp duty and charge an annual levy instead — the system you already live under in Washington. For American buyers, the arithmetic changes completely. Just not in the direction you’d assume.
Here is a number I put in front of a client in Mayfair last month, and it stopped the conversation cold.
He is American. He owns a house in Washington. He wants a flat in London — a real one, three bedrooms, lateral, somewhere he can leave a suit and a decent bottle. Call it £5 million.
His stamp duty bill is £863,750.
Not his closing costs. Not his fees, his lawyers, his survey, his Land Registry. His tax. Wired to HM Revenue & Customs on completion day, before he has turned a key, and never seen again. It is 17.3% of the purchase price. The last pound he spends is taxed at 19% — 12% top band, plus the 5% surcharge for owning another home, plus 2% for the crime of being a foreigner.
He looked at the number for a long moment and said: “So I have to make eighteen percent just to break even.”
Yes. That is exactly what it means. And it is why prime central London, one of the great cities on earth, is trading roughly 24% below its 2014 peak while global wealth has compounded for a decade.
Now Andy Burnham wants to abolish it.
What is actually on the table:
Let’s be precise, because the market is not being precise.
Burnham will almost certainly be Prime Minister within ten days. Nominations closed the way everyone knew they would; he took 322 of Labour’s 403 MPs on day one. Starmer hands over the keys on the 20th.
He has not published a housing tax policy. What he has done is say, on the record and repeatedly, that he has “long been persuaded of the argument for a land value tax” and that council tax — still assessed on 1991 valuations, which is a sentence that ought to embarrass a serious country — is “highly regressive.” He is a listed supporter of Fairer Share, a cross-party campaign whose plan is now reportedly being worked through by his team.
The Fairer Share Plan is simple enough to fit on a napkin. Abolish stamp duty. Abolish council tax. Replace both with a flat annual charge of 0.48% of the property’s value. Second homes, empty homes, and homes owned by overseas buyers pay double: 0.96%.
Read that again if you’re American. An annual tax, levied as a percentage of assessed value, with a surcharge for non-occupants, and no tax on the transaction itself.
That is the District of Columbia. That is Virginia. That is Connecticut, Florida, and every other jurisdiction where you have ever owned a home.
The mirror: Georgetown vs London
A $5 million house in Georgetown pays DC roughly $46,000 a year — 0.85% on the first $2.558m, 1.00% above. When you bought it, you paid 1.45% recordation. Nobody in Washington considers this exotic. It’s a line item. You underwrite it, you forget it, you pay it in two installments and complain about the trash collection.
Under Burnham’s scheme, a £5 million London flat owned by an American would pay 0.96% — about £48,000 a year — and nothing at all to buy it.
We have spent a decade telling American clients that London is expensive to enter. What we mean is that London is expensive to enter. It is cheap to own. The proposal inverts both.
Here is the trade, in full:
At £1.5 million, an American second-home buyer pays £198,750 in stamp duty today — 13.3%. The proposed annual levy would be £14,400. It would take fourteen years of the new tax to equal one afternoon of the old one.
At £3 million: £483,750 today, 16.1%. Annual levy, £28,800. Seventeen years.
At £5 million: £863,750 today, 17.3%. Annual levy, £48,000. Eighteen years.
At £10 million: £1,813,750 today, 18.1%. Annual levy, £96,000. Nineteen years.
Eighteen years. On a £5 million flat, it takes eighteen years of Burnham’s annual tax to equal what the British government takes from you on the first afternoon under the current one. And in the meantime, you would have paid nothing at all to buy it.
Why is this both a price event and a policy event?
Strip a transaction tax out of a market and the price goes up. This is not a forecast. It is arithmetic, and we have run the experiment in both directions.
Britain has raised its transaction tax five times in twelve years. The slab-to-slice reform of 2014, which loaded the top end. The 3% additional-homes surcharge in 2016. The 2% non-resident surcharge in 2021. The surcharge lifted from 3% to 5% in October 2024. The abolition of Multiple Dwellings Relief. Over precisely that period, prime central London fell about a quarter from peak, and it did so while the city kept its schools, its law, its language, its art market, its safety, and its time zone. Nothing about London got worse. The toll to get in got worse.
Run it the other way and you get the 2020–21 stamp duty holiday, which produced a transaction surge and a price surge, in the middle of a pandemic, for no reason other than that the tax was briefly gone.
A buyer prices the tax. A seller absorbs part of it in the discount. Remove the tax and that discount has nowhere to go but into the price.
And the current discount is real. LonRes had prime London values down 8.2% year-on-year in June, transactions down 12.7% in the first half, an average 10.4% gap between asking and achieved, and half of all sold properties previously reduced. Savills reckons average prime central London prices are down 24.5% from the 2014 peak. That is not a market in trouble. That is a market with a tax problem, wearing a discount as a bandage.
Now, the part nobody selling you a flat will tell you…
I would not be doing my job if I gave you only the bull case.
One: None of this is Policy Yet. Burnham has not published a plan, and a former Treasury adviser I read this week put the odds bluntly — full replacement of council tax and stamp duty is a multi-year exercise that a new government is more likely to kick into the next manifesto than deliver in year one.
Two: The Near-Term Risk Runs the Other Way. The High Value Council Tax Surcharge — the mansion tax — is already legislated to hit £2m-plus homes from April 2028, and reporting suggests Burnham may cut that threshold to £1.5m. The plausible eighteen-month outcome is not that stamp duty goes away. It is that an annual tax arrives on top of it.
Three: An Annual tax is a Permanent Liability. Knight Frank’s Tom Bill made the sharpest point in the debate: annual revaluations convert house price growth into an ongoing tax bill. Under this system, your appreciation invoices you. Americans know this and price it. Many British owners have never in their lives paid tax on the value of their homes, and they are about to.
Four: The 0.96% is Still a Penalty Rate. Britain is not proposing to stop taxing foreigners more. It proposes moving the penalty from the front door to the annual bill.
What I am telling clients.
Do not wait for the announcement. That is the whole of my advice, and here is why:
If reform comes, it will be announced long before it is enacted, and the day it is announced, the market freezes — nobody signs a contract with a £864,000 tax bill attached when abolition has a date on it — and then it unfreezes violently, upward, with the discount gone and the sellers holding the pen. You will not get to buy in the gap. Nobody does.
Meanwhile, the direction of travel is unmistakable, and it is one-way. Every serious party in Britain — Labour under Burnham, and the Conservatives, who have also pledged to scrap stamp duty — is converging on the same conclusion: tax the asset, not the transaction. Whatever the final shape, the entry cost is going down and the carrying cost is going up. Permanently.
Which means the buyer who wins is the one who buys into today’s discount at today’s carry, pays a one-time cost that is painful but finite and fully known, and owns the asset when the toll booth comes down.
The buyer who loses is the one who waits, misses the discount, and inherits the annual bill anyway.
London is not cheap because London is broken. London is cheap because Britain built a tax that punishes the act of buying, and is now, at last, having second thoughts.
We have about a year.
Jim Bell
202-607-4000
