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Property tax rebate would be denied above 35 per cent equity

ended 25. September 2026

The Resolution Foundation, an independent think tank, published a plan on 24 September to replace Council Tax and the main rates of Stamp Duty in England with one property tax of 0.7 per cent of a home's value, charged on occupiers with a means-tested rebate. It is a proposal, not government policy. The authors want a revaluation of homes launched at the 28 October Budget, a job they expect to take at least two years.

The catch is who gets the rebate. Unlike the old Council Tax Benefit it is modelled on, the means test would also count home equity. Owners on low incomes with under 35 per cent equity would get the rebate. Those with more would be denied it and offered deferral, with the bill paid in a lump sum when the home is sold. So a retired owner on a small pension in a mortgage-free house would get no rebate: she would pay from her pension or let the bill build up against the home. On a £300,000 home, 0.7 per cent is £2,100 a year. The authors concede the 35 per cent line creates a cliff edge, giving lower-income borrowers on a rebate a reason not to pay down their mortgage, though they say it would seldom apply.

  1. Is deferring the bill until sale a fair way to make equity-rich owners pay, or a debt on the family home by another name?
  2. Who would this hit hardest, the retired owner whose bill mounts against the house or the borrower sitting near the 35 per cent line, and is that fair?
  3. Do you have a client weighing equity release, downsizing or overpaying a mortgage whose plans would change under a design like this? Please give as much detail as you can.

3 responses from the Newspage community

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Tony SanchezVerified
Founder at Bridging Loan Directory
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Deferral could help someone with a valuable home but little income stay there without facing an unaffordable annual bill. But the tax would still have to be paid when the property is sold, leaving less equity for their next home or retirement.

The proposed 35% equity cut-off is harder to justify. A low-income borrower could lose a rebate simply by paying down enough of their mortgage to cross that line. That creates an incentive to keep a debt outstanding, even though repayment would normally strengthen their finances.

Removing stamp duty could make moving easier, which is part of the proposal’s appeal. The detail would matter enormously, though: how deferred bills build up, whether interest is added, and what happens when an owner downsizes. This is a think tank proposal, not a change people need to act on now. I haven’t seen anyone alter a finance decision because of it.
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Tony RedondoVerified
Founder at Cosmos Currency Exchange
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The left-wing Resolution Foundation's latest brainwave, a 0.7% property tax punishes exactly the people who did everything right: the risk-averse, the ones who never overborrowed and paid down the mortgage. Frugality, it seems, is to be taxed rather than rewarded. Deferring the bill until sale is little more than a government-run equity release and an accruing charge that quietly eats the estate left to beneficiaries. Retirees on fixed pensions who lose the rebate through high equity face a miserable choice: a lower standard of living or debt on a home they've paid off. Worse, there's a cliff edge at 35% equity. Cross it and the rebate vanishes, so why keep overpaying? Expect homeowners nearing retirement to funnel surplus cash into savings rather than the mortgage, and older owners in pricier homes to downsize early to escape decades of compounding liability.
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Nouran MoustafaVerified
Practice Principal & IFA at Roxton Wealth
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Deferral sounds softer than an annual bill, but economically it is still a liability building against the home.

For a retired owner on a low pension, that matters because the tax may be affordable only by reducing disposable income, downsizing or allowing the bill to accumulate until sale. For borrowers near the proposed 35% equity line, the issue is different: a hard threshold can distort behaviour by making mortgage overpayments less attractive at the margin.

That is the real technical problem with cliff edges. Two households with very similar finances can face very different outcomes because one sits just above a line.

I would not invent a client case, but this type of design could absolutely affect decisions around downsizing, equity release and mortgage overpayments.

Policy should be judged on behaviour as well as revenue.