The UK property market has been a source of frustration, and the Labour government has identified the sector as a major barrier to economic growth. One of the areas that may be reviewed is how property is taxed.
Indeed, the Institute for Fiscal Studies suggested tax is damaging the housing market in a December 2024 podcast.
For aspiring homeowners, soaring property prices mean many are struggling to save the deposit they need to secure a mortgage and pass affordability checks. In addition, taxes could mean existing homeowners who want to move up the property ladder or downsize decide against it because of the bill they would face. In turn, this means there are fewer properties suitable for first-time buyers.
So, what taxes do you pay as a homeowner?
1. Stamp Duty
Stamp Duty is a tax that most people will pay when buying a property in England and Northern Ireland. So, if you’re looking to move home, it’s an important cost to include in your calculations. Indeed, according to government figures, in the 2023/24 tax year, property purchases generated around £14,815 million in Stamp Duty.
Stamp Duty affects the housing market as it may discourage people from moving, which could mean there are fewer property transactions and available homes suitable for first-time buyers and those looking to move.
The amount of Stamp Duty you pay will depend on the purchase price of the property and your circumstances. From 1 April 2025, the standard Stamp Duty rates will be:
| Property value | Stamp Duty rate |
| Up to £125,000 | 0% |
| The next £125,000 (from £125,001 to £250,000) | 2% |
| The next £675,000 (from £250,001 to £925,000 | 5% |
| The next £575,000 (from £925,001 to £1.5 million) | 10% |
| The remaining amount (anything more than £1.5 million) | 12% |
So, if you’re buying a property that will be your main home for £600,000, you’d pay £17,500 in Stamp Duty. Whether you’re looking to move up or down the property ladder, that sum might mean you reconsider your decision.
If you’re a first-time buyer, you may benefit from a relief that will lower the amount of Stamp Duty you pay.
If you’ll be purchasing an additional property, including buy-to-let properties, a 2% Stamp Duty surcharge will apply.
Please note: Scotland and Wales have their own iterations of Stamp Duty with different thresholds and rates.
2. Council Tax
For many homeowners, one of their largest monthly expenses after housing costs will be Council Tax, which has often been criticised for being outdated.
Council Tax is a tax on residential property. The money collected through Council Tax is used by councils to pay for the services they provide, such as rubbish collection or maintaining roads.
The Council Tax band your property is placed in is based on the value of the property as it was on 1 April 1991, not the price you paid for it or its current value. This means you could pay the same rate of Council Tax as your neighbour, even if a renovation project means their property is worth more today.
According to the government, the average band D property was liable for £2,171 in Council Tax in 2024/25. However, Council Tax rates vary across the country.
Critics claim inequity in Council Tax distorts the housing market as it exacerbates regional disparities, as areas with higher rates of Council Tax may be less attractive to buyers and investors, and, again, discourages mobility.
3. Capital Gains Tax
If you own a second property, you might also need to consider Capital Gains Tax (CGT) when you sell it.
CGT is a type of tax you pay when you make a profit when disposing of certain assets, including second homes, such as buy-to-let properties or holiday homes.
In the 2024/25 tax year, you can make profits of up to £3,000 before CGT is due. This is known as the “Annual Exempt Amount”. If your gains exceed this threshold, as they are likely to be when selling a property, you may be liable for CGT.
The rate of CGT depends on which Income Tax bands the taxable gains fall into when added to your other income. Since 20 October 2024:
- The lower rate of CGT is 18%.
- The higher rate of CGT is 24%.
If you’ve disposed of other assets that could be liable for CGT during the same tax year, you’ll need to consider these gains to accurately calculate your CGT bill.
Rising CGT liability could mean more landlords and second homeowners sell their properties, or that second property transactions fall. While this might seem like it could support the property market, particularly for first-time buyers, it may also lead to rental prices rising, which would place further pressure on those saving to buy a home.
Contact us to talk about your mortgage
If you’re looking to move home or want to take out a new mortgage deal on your current property, please get in touch. We could work with you to understand your needs and offer guidance throughout the mortgage process.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
The Financial Conduct Authority does not regulate some buy-to-let and commercial mortgages.
