Proportional Property Tax London: Direction Is Clear

Two forces pulled against each other in the prime London market this week. At home, tax pressure built ahead of the budget — a new report reviving the case for a proportional property tax in London, while Labour MPs moved to close a loophole that had cut one billionaire’s bill by £18 million. Abroad, international capital kept backing London fundamentals — Gulf and Indian investors buying prime property in bulk, high-value mortgage lending rising as wealthy buyers use debt strategically, and 4,629 completed new builds sitting unsold as opportunity as much as warning. The thread running through all six stories is consistent: tax and tenure now matter as much as postcode, and scarcity, not sentiment, ultimately sets prime London values.

1. Proportional Property Tax London: The Intellectual Groundwork for Reform

A new report argues that London homeowners collectively underpay approximately £3.1 billion a year under a council tax system still pegged to 1991 values. Furthermore, it presses the case for a proportional property tax in London, softened by a rebate for low-income households and a deferral scheme for the asset-rich but cash-poor.

For prime central London, where the gap between old banding and current values is widest, this is the intellectual groundwork for reform rather than a fringe proposal. Consequently, owners should read it as a directional signal. The political momentum is toward taxing London property on what it is actually worth today — and the budget provides the next opportunity to move that direction into policy. For our earlier analysis of how the mansion tax threshold has already moved, read our post on mansion tax threshold London: the net widens to £1.5m. For the government’s current council tax framework, see gov.uk’s council tax guidance.

2. Labour Moves to Close the £18 Million Loophole

A group of Labour MPs is pressing to close a loophole that, according to the Financial Times, trimmed one billionaire’s tax bill by £18 million. This forms part of a wider pre-budget push on how the wealthy are taxed on property. However, the specific detail matters less than the mood behind it.

Scrutiny of ownership structures and legitimate tax reliefs is intensifying. Moreover, what has long been accepted planning is being recast politically as something to be closed. For owners holding property through structures — companies, trusts, or complex arrangements — this is the moment to review, not defend. Taking independent advice before a budget announcement is always easier than restructuring after one. For HMRC’s current guidance on property ownership structures, see gov.uk’s property tax guidance.

3. Gulf and Indian Investors Are Buying Prime London in Bulk

Gulf and Indian investors are reportedly buying prime London property in bulk — whole blocks rather than individual flats — drawn by rising rents and a sharp shortage of suitable investment stock. Additionally, bulk deal activity has jumped significantly against a first half of 2025 that saw just one such deal worth £16 million.

This is the capital pull side of this week’s story. As tax pressure builds at home, international money continues to back London’s fundamentals with conviction. For prime London owners weighing whether to sell, it is a meaningful reminder that scarcity, not sentiment, sets prime values. Demand from serious international capital has not retreated — it has simply shifted format, moving from individual unit acquisitions to block-level transactions. For our earlier analysis of how Gulf capital continues to deploy in prime London, read our post on non-dom return London property: why safety beats tax.

4. High-Value Mortgage Lending Is Rising — Debt as a Planning Tool

High-value mortgage lending is reportedly on the rise as affluent buyers deliberately borrow against prime purchases rather than pay cash. This represents a telling shift in behaviour at the top of the market. Rather than deploying liquidity, sophisticated buyers are using leverage as a planning tool against a backdrop of tax change and shifting rates.

For clients weighing how to fund a prime acquisition, therefore, the lesson is clear: structure and financing now carry as much weight as price. The decision between cash and debt is no longer purely financial — it is increasingly driven by tax efficiency, estate planning, and the optionality that leverage preserves. For our earlier analysis of how buy-to-let lending in London has changed, read our post on buy-to-let lending London: what banks want from landlords now.

5. 4,629 Completed but Unsold New Homes — Opportunity as Much as Warning

Molior London puts the number of completed but unsold new homes in the capital at 4,629 at the end of June — the highest figure the researcher has recorded. This is a clear sign of strain in the new-build market and underlines warnings that London’s housing supply crunch is about to bite harder.

For prime buyers, however, the overhang is opportunity as much as warning. Developer distress at the upper end tends to translate into negotiable prices, flexible terms, and incentives that would not exist in a balanced market. Consequently, it is worth watching the new-build market closely into the budget. The buyers who move while others hesitate are typically the ones who look back at this period as the entry point they needed.

6. Leasehold Reform Compensation: Watch the Detail, Not the Slogans

An industry group has warned that leasehold reform — depending on how freeholders are compensated as enfranchisement rules change — could ultimately cost taxpayers billions. Whatever one makes of the messenger, the underlying point is real. The more generous the settlement to freeholders, the slower and costlier reform becomes for leaseholders.

For prime central London, where so much of the finest residential stock sits on long leases, the compensation detail matters enormously. Furthermore, owners would be wise to watch the specific valuation methodology being proposed rather than the political slogans on either side of the debate. The difference between a well-structured lease extension completed now and one done after reform lands could be significant. For the government’s current leasehold reform position, see gov.uk’s leasehold reform overview.

What This Week’s Proportional Property Tax London Bulletin Means for You

Two forces. Six stories. One consistent message: the proportional property tax London debate is building momentum, international capital is simultaneously confirming London’s long-term fundamentals, and the owners who review their structure and position now will navigate what comes next significantly better than those who wait.

If any of this week’s stories raises a question about your own position, get in touch for a no-obligation 15-minute conversation: ask@londonproperty.co.uk

Join the Conversation

Which of this week’s six stories is most relevant to your position — the proportional property tax proposal, the Labour loophole closure, or the new-build overhang opportunity? Share your thoughts below and follow London Property for your weekly bulletin every week.

Subscribe to Our Newsletter

London Property is dedicated to assisting our community in preserving and enhancing property wealth. Through weekly news bulletins and expert conversations, we provide the latest insights from leading agents with our “Word from the Street” series. Follow us to stay ahead and make informed decisions on your terms. We specialise in finding creative solutions to property challenges. Sign up to our newsletter to be kept informed as new content is released. SUBSCRIBE