Andy Burnham weighs property tax and capital gains reforms as PM

As Andy Burnham prepares to enter No 10 on Monday following his appointment as prime minister, his incoming administration faces immediate scrutiny over a proposed overhaul of the nation's tax system. Having secured the Labour leadership unopposed, Mr Burnham has signalled that his tenure will be defined by significant shifts in economic policy, specifically targeting property wealth and capital gains to balance the national finances.

Central to these discussions is a potential departure from existing council tax and stamp duty arrangements. Mr Burnham has long been a vocal critic of the current property tax system, which relies on property valuations from 1991. He has described the status quo as not justifiable because residents in homes worth double-figure millions can pay less council tax than those in lower-value properties elsewhere in the country, according to reports in Yahoo Finance. As a supporter of the Fairer Share campaign, the new prime minister has previously advocated for replacing current levies with a property tax of 0.48pc of a home's value, a move that would significantly shift the tax burden toward homeowners in London and the South East while potentially lowering bills for residents in the North West.

Potential Property and Capital Gains Shifts

The proposed reforms extend beyond council tax. Mr Burnham is reportedly weighing an expansion of the "mansion tax" by lowering the threshold for homes subject to an additional levy from the current £2m to £1.5m. Such a change would impact an estimated 137,000 additional properties. Simultaneously, his administration is considering fundamental changes to capital gains tax (CGT), specifically the removal of the "uplift on death." Under current rules, assets are revalued at the point of inheritance, shielding gains made during a lifetime from CGT. Scrapping this provision could leave grieving families facing a significant tax surge, with Begbies Chartered Accountants warning that a double levy alongside inheritance tax could create an effective tax rate of 62pc in certain cases.

Economic Strategy and Market Response

The incoming prime minister faces a delicate balancing act. While he has expressed a desire to put more money into households' pockets, his remarks regarding the need for "difficult" decisions have unsettled investors. Bond markets have reacted with sensitivity to the transition, with the yield on 10-year gilts rising. Mr Burnham previously cautioned against being in hock to the bond markets last year, a stance that analysts suggest could lead to higher borrowing costs if financial institutions do not align with his fiscal trajectory.

These challenges are compounded by internal party friction regarding previous campaign pledges. During the leadership process, Mr Burnham faced criticism for suggesting billions in compensation for "Waspi" women, a promise his spokespeople later retracted in favour of potential non-monetary support. Furthermore, he is under pressure to reconsider his party's stance on business rates, particularly regarding relief for pubs and music venues, though the funding mechanisms for these cuts remain opaque.

What to Watch Next

• Budgetary Decisions: Whether the prime minister pursues a "care levy" to replace inheritance tax, a concept he revived as recently as 2023.
• Market Stability: Continued monitoring of 10-year gilt yields to see if the new government's fiscal plan gains credibility with international investors.

As the government settles into No 10, focus will turn to whether Mr Burnham can deliver the promised structural changes without triggering a deeper conflict with middle-class taxpayers or the financial sector. With regional imbalances in property values and local government funding constraints, the administration is expected to prioritise these tax debates in the opening months of the new term.