Property

Reeves to target high-value properties with council tax reforms amid London market downturn

Sunday, 2 November 2025 5:06AM UTC

UK Finance Minister Rachel Reeves is considering modifying council tax bands to raise revenue and address fiscal shortfalls, risking further impact on London's volatile property market amid a 36% decline since 2018.

The City of London has experienced a substantial decline in average property prices, dropping 36 percent since 2018, highlighting significant shifts in the capital's real estate market. Amidst this backdrop, UK Finance Minister Rachel Reeves is reportedly considering reforms to council tax payments, targeting owners of more expensive houses to help address an estimated £20 billion shortfall in the Treasury's finances. According to individuals familiar with the matter, Reeves’ approach may favour adjusting council tax bands rather than imposing direct sales taxes on costly properties, which experts caution could stall the housing market by deterring transactions.

The current council tax framework relies on property valuations dating back to the 1990s, a system increasingly criticised for its misalignment with modern property values—particularly in cities like London where house prices have surged. This anomaly has resulted in some owners of multi-million-pound estates paying similar council tax rates as those in modest terraced houses in smaller towns. Revising the tax bands to reflect higher market values, including potentially doubling rates on properties in the highest bands, is projected to generate additional revenue in the low billions. The Institute for Fiscal Studies (IFS) estimates such a "supercharged" council tax on high-value properties could raise around £4.2 billion.

Reeves has flagged plans to underscore higher taxes on wealthier individuals in the forthcoming Budget on November 26, as part of her broader fiscal strategy. While Labour has pledged to refrain from increasing income tax, VAT, or National Insurance, her budget is expected to include various measures targeting wealthier segments, including reforms to capital gains tax and inheritance tax parameters. These proposals come amid mounting pressure to plug a growing deficit in public finances worsened by slow GDP growth and sustained inflation.

The potential council tax reform aligns with longstanding debates over property taxation in the UK. Former Chancellor George Osborne supported similar reforms, though they were later shelved under David Cameron's leadership. Current discussions emphasise administrative simplicity, aiming to develop a system that is both fairer and easier to manage, while minimizing distortions in the housing market.

Industry analysts warn that changes to property taxation could further challenge London’s real estate dynamics, where prices remain disproportionately high relative to the rest of the country. Property experts such as Peter Graham from RSM UK suggest London risks becoming less attractive to young professionals as rising costs push them away, potentially slowing the pace of housing transactions and prompting sellers to delay moves or downsizing.

London’s property market has endured notable volatility over recent years. Data reveals that prime London properties suffered significant price reductions around 2018, exacerbated by political and economic uncertainties tied to Brexit. For instance, buyers using US dollars enjoyed substantial price advantages during that period due to sterling depreciation. More recently, despite some stabilisation in key areas like Canary Wharf—where property values hovered around £6.75 billion in early 2024 after pandemic-related declines—challenges remain, including high office vacancy rates and major tenants relocating to more central locations. These factors contribute to considerable uncertainties impacting property valuations and transaction volumes.

In response to these market complexities, the IFS advocates for comprehensive tax reform rather than isolated rate hikes. In its analysis, the IFS underscores the limitations and risks of simply increasing existing tax rates and suggests more nuanced approaches, such as restructuring property taxes to focus on wealth and adjusting local tax burdens based on regional house price growth. The Institute also advises caution regarding proposals like an annual wealth tax, which has support within some Labour circles but is viewed skeptically by tax experts.

Beyond council tax considerations, government officials are exploring the replacement of stamp duty on owner-occupied homes with a new form of property tax—the so-called "homes tax." This levy would mostly impact owners in London and the South East, where average house prices significantly outstrip the national average. The proposal would tax owner-occupiers on homes valued above £500,000 upon sale, with rates calibrated to property value. Although no final decisions have been made, this tax could form the basis for future local levies designed to eventually supplant council tax.

As the November Budget approaches, all eyes remain on Reeves’ announcements, which will signal the government's approach to balancing fiscal responsibility with maintaining a healthy housing market. While reforms targeting wealthier property owners are widely anticipated, policy-makers face the delicate task of crafting measures that raise necessary revenues without unduly discouraging market activity or exacerbating London’s housing affordability issues.

📌 Reference Map:

Paragraph 1 – ^[1] (Facilities Management Now), ^[2] (Reuters)
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Paragraph 3 – ^[1] (Facilities Management Now), ^[3] (MoneyWeek)
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Paragraph 7 – ^[6] (CNBC), ^[4] (Reuters)
Paragraph 8 – ^[5] (Reuters)
Paragraph 9 – ^[7] (The National News), ^[1] (Facilities Management Now)
Paragraph 10 – ^[1] (Facilities Management Now), ^[5] (Reuters)

Source: Noah Wire Services

More on this

https://www.facilitiesmanagement-now.com/article/232780/reeves-plans-autumn-budget-tax-raid-on-mansions?utm_source=facilitiesmanagement&utm_medium=newsfeed&utm_campaign=facilitiesmanagement-articleId-232780 - Please view link - unable to able to access data
https://www.reuters.com/world/uk/uk-finance-minister-reeves-plans-tax-raid-owners-expensive-homes-ft-reports-2025-10-31/ - UK Finance Minister Rachel Reeves is reportedly planning a tax increase targeting owners of expensive homes, according to the Financial Times. The strategy involves introducing new, higher bands of council tax as a means to generate several billion pounds for the exchequer, which is currently facing financial strain. The report has not yet been independently verified by Reuters.
https://moneyweek.com/personal-finance/tax/budget-tax-rises - Chancellor Rachel Reeves is preparing the 2025 Autumn Budget amid significant economic challenges, including sluggish GDP growth, high inflation, and a £22 billion hole in public finances. While Labour has pledged not to raise income tax, VAT, or National Insurance, Reeves indicated that additional taxes on the wealthy are likely. Rumored measures include extending the income tax threshold freeze until 2030, reducing tax relief on salary sacrifice schemes, limiting pension tax-free cash, raising capital gains tax (CGT) on investments, and tightening inheritance tax (IHT) rules such as lifetime gift caps.
https://www.reuters.com/markets/europe/londons-canary-wharf-property-values-stabilise-after-pandemic-slump-2025-04-17/ - Property values in London's Canary Wharf financial district stabilized in 2024 at approximately £6.75 billion ($9 billion), following a 15% decline in 2023 caused by the pandemic's impact on office demand. The slight 1% decrease from the previous year marks a trend toward recovery, aided by strategies to diversify the district's tenant base with more residential, hospitality, and retail offerings. Despite this, the district faces challenges, including major tenants like HSBC planning to relocate to the more central City of London, and office vacancy rates in the wider Docklands area reaching record highs. Vacancy rates may rise further to 30% if 2 million square feet of upcoming vacancies are not filled. To manage its financial obligations, the Canary Wharf Group secured a £610 million loan from Apollo to refinance maturing bonds, increasing debt service costs but mitigating immediate refinancing risks. Signs of recovery are emerging as companies increasingly require employees to return to the office, potentially boosting demand for space in the longer term.
https://www.reuters.com/world/uk/uks-reeves-should-use-budget-reform-tax-system-ifs-says-2025-10-12/ - The Institute for Fiscal Studies (IFS) has urged UK finance minister Rachel Reeves to implement comprehensive tax reforms in her upcoming November budget, instead of merely increasing existing tax rates to raise the estimated £30 billion needed for public finance goals. The IFS highlights that raising tax rates on income, VAT, or social security—which Reeves and Prime Minister Keir Starmer have pledged not to do—would be less effective and potentially more harmful to the economy. Instead, the IFS recommends more rational and targeted approaches, such as reforming wealth-related taxes like capital gains tax and overhauling property taxation. One suggestion includes shifting local property tax burdens to areas with greater house price growth, such as London, and scrapping stamp duty. The IFS opposes an annual wealth tax, a policy backed by some in the Labour Party. Meanwhile, the National Institute of Economic and Social Research proposed breaking Reeves's tax pledge if necessary to prevent economically damaging revenue-raising strategies.
https://www.cnbc.com/2019/02/13/dollar-buyers-are-the-big-winners-as-prime-london-property-tumbles.html - The prime property market in London has slowed and prices have fallen sharply. Brexit is blamed by property agents as the main reason for the slowdown. Simon Dawson | Bloomberg | Getty Images The cost of property in London's most expensive neighborhoods tumbled in 2018, with buyers using the U.S. dollar making the largest savings. Analysis of three prime property areas in the city suggested that sold house prices at the top end of the London market averaged around 6 percent less in 2018 from the year before. New data published by real estate analysis firm LonRes also revealed that more than half of properties had to fall in price before managing to achieve a sale. The accompanying report, published Tuesday, claimed that buyers of homes in prime central London paid 14 percent less during the last three months of 2018 compared with the 2014 peak. Moreover, during 2018's fourth quarter those buying top London property in U.S. dollars are estimated to have averaged a 36 percent saving compared to 2014's peak prices. The value of sterling has fallen sharply with a steep drop in value shortly after the result of the 2016 referendum on the U.K.'s membership of the European Union (EU). Roughly £2.9 billion ($3.7 billion) of housing stock was sold in the prime central London area in 2018 compared to £3.5 billion in 2017. Meanwhile, transactions in the fourth quarter of 2018 were down 13 percent, compared to the same period in 2017. Brexit, the U.K.'s exit from the EU, was cited by some 69 percent of agents who answered the survey as the root of the slowdown in 2018. Almost half said Brexit would remain the biggest drag to demand in the year ahead.
https://www.thenationalnews.com/news/uk/2025/08/19/rachel-reeves-puts-londons-property-market-in-her-pre-budget-crosshairs/ - Government officials are said to be looking at a potential property tax, which would replace stamp duty on owner-occupied homes. The “homes tax” would disproportionately affect homeowners in London and the South-East, where properties are more expensive. The average UK house price currently stands at £282,766, compared with £673,000 in London. No final decision has been made, but it is thought this tax covering England and Wales could help to build a model for local levies to replace council tax in the medium term. Chancellor Rachel Reeves would unveil any changes to the government’s tax policy at a fiscal event, such as a budget. The next budget is scheduled for late October or early November. Buyers pay stamp duty under the existing framework, if they purchase property worth more than £125,000, rising from 2 per cent to 12 per cent for sales above £1.5 million. The new levy would be paid by owner-occupiers on houses worth more than £500,000 when they sell their home, with the amount due determined by the value of the property and a rate set by the government.

Noah Fact Check Pro

The draft above was created using the information available at the time the story first emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed below. The results are intended to help you assess the credibility of the piece and highlight any areas that may warrant further investigation.

Freshness check

Score: 8

Notes: The narrative presents recent developments regarding Chancellor Rachel Reeves' proposed property tax reforms, with references to reports from late October 2025. The earliest known publication date of similar content is October 12, 2025, when the Institute for Fiscal Studies urged Reeves to implement comprehensive tax reforms in her upcoming November budget. ([reuters.com](https://www.reuters.com/world/uk/uks-reeves-should-use-budget-reform-tax-system-ifs-says-2025-10-12/?utm_source=openai)) The Facilities Management Now article appears to be a republished version of this earlier report, with the same publication date and similar content. This suggests that the narrative may be recycled, potentially affecting its freshness score. Additionally, the Facilities Management Now article includes a reference map linking to other reputable sources, indicating an attempt to provide updated information. However, the reliance on a single source and the lack of new insights may still warrant a lower freshness score.

Quotes check

Score: 7

Notes: The narrative includes direct quotes attributed to individuals familiar with the matter, stating that Chancellor Rachel Reeves is considering reforms to council tax payments targeting owners of more expensive houses. However, these quotes are not directly attributed to specific individuals or sources, making it challenging to verify their authenticity. Without clear attribution, it's difficult to assess whether these quotes are original or have been used in previous reports. The lack of verifiable sources for these quotes raises concerns about their credibility.

Source reliability

Score: 6

Notes: The Facilities Management Now article appears to be a republished version of an earlier report from Reuters, with the same publication date and similar content. This suggests that the narrative may originate from a single source, potentially affecting its reliability. The lack of direct attribution for quotes and the reliance on a single source further raise concerns about the credibility of the information presented.

Plausability check

Score: 8

Notes: The narrative discusses proposed property tax reforms by Chancellor Rachel Reeves, including potential changes to council tax payments targeting owners of more expensive houses. These proposals align with recent discussions and reports from reputable sources, such as the Institute for Fiscal Studies urging comprehensive tax reforms. ([reuters.com](https://www.reuters.com/world/uk/uks-reeves-should-use-budget-reform-tax-system-ifs-says-2025-10-12/?utm_source=openai)) However, the lack of direct attribution for quotes and the reliance on a single source raise questions about the authenticity and originality of the information presented.

Overall assessment

Verdict (FAIL, OPEN, PASS): FAIL

Confidence (LOW, MEDIUM, HIGH): MEDIUM

Summary: The narrative appears to be a recycled version of an earlier report from Reuters, with similar content and publication date. The lack of direct attribution for quotes and the reliance on a single source raise concerns about the originality and reliability of the information presented. While the proposed property tax reforms discussed are plausible and align with recent discussions, the issues with source reliability and potential recycling of content lead to a 'FAIL' verdict with medium confidence.

UK property market
Council tax reform
London real estate