Land Value Tax: What It Means for You

Council tax hasn’t been fundamentally reformed since it was introduced in 1991. The valuations underpinning it are more than thirty years old, successive governments have declined to update them, and the result is a system that many economists and politicians now describe as structurally broken.

That conversation has sharpened considerably since Andy Burnham became Prime Minister in July 2026, bringing with him a long-stated belief that land in the UK is “undertaxed.” So what’s actually being proposed, what’s confirmed, and what does it mean for homeowners in South West London?

Why Is Council Tax Being Questioned?

The core problem is straightforward. Council tax bands were set using 1991 property valuations and have never been revalued in England. In the thirty-five years since, house prices have moved dramatically, and they haven’t moved evenly.

London prices have risen far faster than those in the North, yet council tax bills have not followed suit. The practical result is a system that charges households in deprived northern towns more, relative to their property’s value, than it charges households in some of the most expensive postcodes in the country.

The average Band D household in the North East currently pays £344 a year more than its counterpart in London, on a home worth barely more than half as much.

That inversion is difficult to defend on any principled basis, and it’s the starting point for the reform debate.

Council tax raises significant sums. The Office for Budget Responsibility forecasts it will raise £53.7 billion across Great Britain in 2026–27.

The Two Models on the Table

The government is weighing two main reform proposals, both of which would represent a significant departure from the current system.

Proportional Property Tax

The model most closely associated with Burnham is the proportional property tax, developed by the campaign group Fairer Share. Rather than fixed bands based on 1991 valuations, it would levy a flat percentage of a property’s current market value each year.

The Fairer Share proposal suggests 0.48% on main homes, rising to 0.96% on second homes, empty homes, and overseas-owned properties.

At the UK’s current average house price of just under £300,000, that would mean an annual bill of around £1,440 for a typical main home, with the charge falling on the owner rather than the occupier. Fairer Share claims that 75% of households would see a reduction in their bills under this model.

The directional effect is clear: households in lower-value areas pay less; households in high-value areas pay more. Under the proportional property tax model, the average dwelling in the North East would save £1,087 a year. The average London dwelling would pay £998 more, though 36% of London properties would still come out ahead.

Land Value Tax

A land value tax is a purer reform, and a more radical one. Rather than taxing the value of a property (land plus buildings), it taxes only the value of the land beneath it.

The logic is that land value is largely created by public investment and planning decisions rather than by anything the landowner does, so taxing it doesn’t discourage productive activity in the way that taxing income or buildings might.

ONS National Balance Sheet data values all UK land at £7.10 trillion as of 2024. Modelling suggests that under a full land value tax, around 69% of households would pay less than they do now, while 31% would pay more. The distributional effects are sharper than under the proportional property tax: the biggest winners are deprived coastal and northern towns, with households in places like Hartlepool and Blackpool potentially paying around £1,600 a year less. The biggest losers are concentrated in London and parts of the South East, where land values are highest. Some properties in the most expensive London boroughs would face annual bills running to tens of thousands of pounds.

What’s Actually Confirmed: The Mansion Tax

Neither the proportional property tax nor the land value tax is currently law. There is no confirmed rate, no start date, and no legislation before Parliament. On 27 July 2026, just days after taking office, Burnham explicitly ruled out replacing council tax in the near term, stating: “That won’t be happening.”

What has been confirmed is a more limited measure. Former Chancellor Rachel Reeves announced in the November 2025 Budget that a High Value Council Tax Surcharge, widely referred to as the mansion tax, will be introduced on homes valued at over £2 million. It sits on top of council tax rather than replacing it, is charged on owners rather than occupiers, and operates through four flat annual bands:

Property Value	Annual Surcharge
£2m to £3m	£2,500
£3m to £5m	£3,500
£5m to £10m	£5,000
Over £10m	£7,500

The surcharge will apply from April 2028, with bands uprated by CPI from 2029–30. The Office for Budget Responsibility expects it to raise £0.4 billion in 2029–30.

What This Means for South West London

South West London sits squarely in the territory where any shift to land or property value-based taxation would have the most significant effect. Parts of the area carry land values that reflect decades of sustained price growth, and a proportional property tax or land value tax would recalibrate bills upward for many households.

The mansion tax is the immediate practical concern for higher-value properties. A home in, say, Putney or Richmond that has crossed the £2 million threshold since purchase will face an additional £2,500 a year from April 2028. For properties in the £5 million-plus range, the annual surcharge rises to £5,000.

Longer-term reform remains genuinely uncertain. The political appetite for a full land value tax or proportional property tax is real, but so is the complexity of implementation, the scale of the winners and losers, and the electoral sensitivity of any measure that significantly increases bills for homeowners in high-value areas. The debate will continue, but material change beyond the mansion tax is unlikely in the short term.

The most useful thing any homeowner can do now is understand where their property sits relative to the thresholds being discussed, and factor the confirmed mansion tax surcharge into their planning if they’re in the relevant bracket.

If you own property in South West London and want to understand how these changes might affect your position, Avrasons can help you think through the practical implications. Whether you’re considering a sale, reviewing your portfolio, or simply want a clearer picture of your property’s current value, contact our team to arrange a conversation.

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