The vast majority of UK homeowners are concerned that proposals to replace stamp duty with a flat property tax would rise over time and present a “significant financial burden”.  

A poll of property owners finds that 96% of respondents believe that the 0.5% proposed annual property tax would creep higher over time, according to a study by intermediary Boon Brokers. 

This fear is most acute among retired and older working households who have paid off their mortgages, 75% of which say, “an annual property tax could pose a significant financial burden and threaten the financial security long associated with homeownership,” reports the broker survey. 

The poll comes after reports surfaced last month that the Chancellor is considering a national property tax to replace stamp duty and a local homes tax that would be phased in to replace the council tax. 

The Treasury is understood to be looking at plans for a new property tax on the sale of homes worth more than £500,000.    

This tax would be paid by homeowners rather than buyers, as is the case with stamp duty, at a rate to be determined by central government.    

Currently, buyers in England and Northern Ireland are required to pay stamp duty on properties valued over £125,000. For first-time buyers, the threshold is £300,000.    

The levy raised £11.6bn last year, according to government data.    

The new property tax would affect about a fifth of property sales, compared with about 60% with current levels of stamp duty, according to officials.    

Meanwhile, a new local annual property levy, set at 0.5% the value of a home, is being looked at to replace council tax over an unspecified phased period.     

This would see owners, rather than the residents, of a property worth up to £500,000 paying the tax.   

The levy, which may take years to come into effect, is expected to start at £800 a year with funds going directly to local councils, whose finances have been stretched in recent years.     

However, the poll warns that the new taxes could lead to a freeze in housing mobility. 

It finds that 35% of homeowners said they would be less likely to sell if sellers were required to pay a property tax, while 51% added they would be less likely to buy a higher-priced property if an annual property tax were introduced.  

Just 24% of homeowners said they would continue as planned, regardless of the reforms.  

Boon Brokers managing director Gerard Boon says: “Introducing an annual property tax risks undermining the natural fluidity of the housing market.  

“Rather than encouraging people to move for work, family, or space, it could trap households in properties that no longer meet their needs, which seems counterintuitive to the broader goals of a healthy housing market.” 

The firm’s survey was conducted by data group TLF Research between 5 and 12 September among 1,000 mortgage applicants.