I was asked in a comment on this blog last night why I did not emphasise land value taxation as a wealth tax. In fairness, the question could have been asked: why do I not place much emphasis on this tax at all, because I do not.
The reply I have has been adapted as a new glossary entry, as follows:
How Land Value Tax (LVT) is meant to work
A Land Value Tax charges a levy on the unimproved value of land, excluding buildings and other improvements. The theoretical case is attractive. Land is fixed in supply, cannot be hidden or relocated, and much of its value is created by collective action, such as the granting of planning permission, development of infrastructure, creation of transport links, the building of schools, and the strength of the surrounding community. Taxing land value should therefore capture unearned gains, discourage speculation and hoarding, and do so without reducing productive investment, because land cannot be withdrawn from use.
In theory, the tax should fall on landowners rather than occupiers, since the supply of land is perfectly inelastic. That is why LVT is often described as an efficient and progressive wealth tax.
Why this breaks down in practice
1. Valuation is a fundamental problem
Separating land value from buildings is technically possible, but it is not simple, transparent, or intuitive. Valuations would be disputed, frequently revised, and hard for taxpayers to understand or verify. That matters politically. A tax people do not understand, or trust, will not sustain consent, however elegant the theory. Administrative costs, appeals and uncertainty would be significant.
2. Incidence is not as theory predicts
In real-world housing markets, and in particular, in the UK's highly supply-constrained one, landlords often pass costs on through rents. Without rent controls, strong tenant protections and major planning reform, LVT risks falling on occupiers rather than owners. At that point, it stops functioning as a wealth tax and becomes another charge on living somewhere, disproportionately affecting renters and lower-income households.
3. It is not, by itself, a reliable wealth tax
Wealth is multidimensional: financial assets, business ownership, intellectual property, offshore holdings and inheritance. LVT captures only land-based wealth. In economies where wealth accumulation increasingly occurs through financialisation rather than land alone, LVT misses large concentrations of power and income.
4. Local government funding risks are real
If LVT replaces council tax and business rates, revenues become sensitive to valuation cycles and political pressure. Sharp land price adjustments could destabilise council finances unless the central government guarantees funding. That reintroduces dependence on grants and undermines claims that LVT strengthens local fiscal autonomy.
The realistic conclusion
LVT might have uses, but it is very far from a silver bullet. It can help deter land hoarding and speculation, especially on undeveloped or vacant land, but on its own, it is a weak and potentially regressive substitute for serious wealth taxation and alternative or local authority land-based taxes.
Without complementary policies, including rent regulation, planning reform, strong tenant protection, and guaranteed central funding, LVT risks shifting the tax charge onto tenants and leaving councils exposed. That is why it should be treated as a supporting instrument at best with regard to both wealth and local taxation.
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Would a ‘property tax’ be simpler? Tax on the value of any land or buildings you have title to? Is that how rates used to work? In terms of handling the workload of valuation for tax, could people be required to submit their own valuations through a simple portal on HMRC? If this register were open for the public to inspect then disingenuous low valuations would be auditable by concerned citizens. At the same time, if a property is sold at a higher price than the valuation, this could trigger an investigation? Does an open ownership register sound too much like Stasi citizen surveillance? We can already search for property owners but it is quite a cumbersome process and you have to specify each property you want to know about and cause administrative work for the land registry staff.
Why bother?
There are so many better options to use first in the Taxing Wealth Report 2024.
Yes…. but property does seem to me to me an “under-taxed” or at least “wrongly taxed” asset. Stamp Duty makes moving costly (particularly for larger houses) so prevents mobility both geographically (to a new job) and generationally (old folk down-sizing). So, I think a modified and increased council tax based around a new valuation would make sense.
CGT and LVT have too many practical and political barriers… so I suspect that tweaking Council Tax is the “least worst” option.
I do think some property use needs to be taxed a lot more..
I agree
But LVT makes little sense
In the USA almost every county AND City has some sort of “Property Tax” which funds local county & city governments.
It works very well. The only people who complain are those who own “investment properties” which are given none or few “tax breaks”.
Primary homes (in Florida called a Homestead property) are given many tax breaks and tax exemptions.
Its quite interesting because there is support for a LVT in Scotland BUT and often by the same people support for ‘Compulsory Sale Orders’ – which I think is a very sensible idea.
See https://www.landcommission.gov.scot/downloads/5dd6a16d88752_CSO-Proposal-final.pdf
These are an alternative to a Compulsory Purchase Order (CPO) and one of the reasons for it is that in the case of Commercial Land or Property because the market is not very liquid so its hard to establish a value for Compulsory Purchase BUT by putting the property up for sale that gets around the problem.
So if its difficult to implement a CPO because you cant establish a value for Commercial Land and Property imagine doing it for all landholdings?
My suggestion might be a tax on leases as most business premises are leased similar to VAT with separate arrangements for ‘owned’ commercial property and empty land
Hi John,
Thanks for pointing to this.
I live in Scotland and would support CSOs.
From what I can see they have not yet been implemented.
The Empty Home Partnership and Shelter Scotland ( https://emptyhomespartnership.scot/wp-content/uploads/2025/10/Compulsory-Sale-Orders-Project-2025.pdf ) seem to have gotten themselves bogged down with ruminating on whether councils should buy property put up for sale via CSO if a private buyer does not come forward. This seems absurd. We already have a home report system in Scotland where a current independent valuation of any property is part of the sale process. We could just oblige the seller to put the property on the market at Home Report Value and let a buyer come in good time. This idea of stepping in with council funds just seems like another public money guarantee to pay the rich for their underperforming assets. The purpose of CSO should surely be just to force the assets into availability for the time when there is someone who can make use of them.
I do like the idea of LVT, but I guess, as your Taxing Wealth report shows, there are many other more low-hanging tax fruit!
I agree we should implement the taxing wealth report. 100%. I despair that you are not chancellor of the exchequer. I suppose I’m a little bit obsessed with the idea of everyone gradually owning the land, homes and other buildings they already pay for with rent. Any change from a perpetual rent system to a gradual transfer of ownership contract would need asset taxation alongside it so that people didn’t just hoard land and buildings to cash in the asset value accumulation without in the meantime making the properties available for rent or ‘gradual purchase’. That is my reason for being preoccupied with how to implement a progressive property tax that makes owning more than you use without letting those properties unprofitable. My preference would be to err on the side of making such practices decidedly costly.
We do tax the value of land in the UK already, just not very much and not very effectively.
* Income tax on rent and development profit, capital gains tax on disposals (with big holes such as uncapped PPR), and both have been expanded in the last decade or so to include property related income and gains of non-residents, and indirect disposals of land.
* Inheritance tax – again with structural holes, including APR and the resident nil rate band.
* More directly, council tax (although based in 1991 values) and business rates (which disadvantages “bricks and mortar” over internet retailers). These are big taxes – around £45 billion and £30 billion respectively. Also the annual tax on enveloped dwellings and the new high value council tax surcharge from 2028, although both of these are tiny.
* SDLT (in England and NI) raises around £14 billion. There are plenty of problems here, such as the borderline between residential rates up to 19% but non-residential rates up to 5%. For example, see the recent Sehgal decision in the tax tribunal, where a 2 metre by 4 metre storage unit made a difference of £1.7m of SDLT. https://www.bailii.org/uk/cases/UKFTT/TC/2025/TC09696.html
Layer upon layer of taxes without much coherence. Capital gains tax, inheritance tax, and SDLT are inherently “lumpy” – needing a disposal, or a chargeable transfer, or a sale.
There is certainly something to be said for a more wide ranging annual tax on the ownership and use of land. We already do it for council tax but its structure is inherently regressive. A 1% or 0.5% annual tax on the value of land might be start. Not least, to encourage elderly single people living in large family homes (that often fall into disrepair) to move somewhere more suitable and to free up stock, and also to discourage land banking. The large house builders have little interest in meeting government targets for new homes – they need a slow release of a rare resource to maintain prices and profits.
Noted.
How would you design this tax?
How would you sell it?
How would *I* design the tax? I’m not a politician or policy wonk or economist thankfully!
Well first I’d want to look at the academic literature for insights on policy design. Then I’d want to learn how other countries do this in practice. Many states have annual taxes based on property values. I expect I would want the tax to be self assessed but subject to challenge on valuation. You might allow people to use the same valuation for say five years to make things a bit simpler. The purchase price is known and then after five years you’d need a desktop valuation. With a minimum threshold to simplify compliance – minimum payment of £500 or £1000 say. You might want a mechanism to allow payment to be deferred until a realisation, secured as a charge against the property, with the purchaser subject to a withholding obligation.
How to sell it? In the first instance I would want it to be revenue neutral or even lower level than council tax to ensure buy in to the system. People expecting to pay more will object anyway but they can afford it. Most people should pay less, by design. The idea would be to reshape distribution from the lower end to the upper end.
You could even roll in abolition of SDLT, or at least cut rates to a much lower level. Moving from irregular but lumpy payments on transactions that change ownership to lower payments each year on actual ownership. You’d want to crunch the numbers but a tax at around 0.25 to 0.5% might not be too far away from current payments.
My apologies. I held this over Chistmas and just found it again.
Three questions: for what reason, with what desired outcome, and who will lose? what is the aim here, in othjer words, and is this really the issue of the moment?
Andrew, I won’t engage on your arguments regarding taxation. I just want to pick up on one of your comments
“A 1% or 0.5% annual tax on the value of land might be start. Not least, to encourage elderly single people living in large family homes (that often fall into disrepair) to move somewhere more suitable and to free up stock”
I think this removes the human element and reinforces the financialisation of the housing stock. For many of the elderly, they may well be living in a large family home that is not suitable but it misses the fact that to them this not just a financial asset to be disposed of. It was their home. Somewhere they lived with their wife for 60 years. Where they raised their children. The home is full of memories for them. As they become increasingly frail and maybe disorientated, their home of 60 years is an anchor for them. I think to tax them out of it is cruel.
From previous comments of yours on Richards blog, I seriously doubt that was your intent.
You are right David. I don’t want to be cruel. But I think people get stuck. Why is your elderly person stuck in unsuitable accommodation when they could have a much better quality of life somewhere that better meets their needs?
Because it is their home.
0.5% for assets up to the average UK house price. Gradually progressively more after that. Demand an annual self report from property owners. Any deed to property that has not been declared for taxation is considered void and ownership reverts to the state. Fraud when identified is punished with partial or full transfer of ownership to the state. Too authoritarian?
For an average home I think this will be cheaper than most people’s council tax. If it isn’t sell it by setting the lowest rate a bit lower, say 0.4% and making up the income shortfall in the higher bands. Sell it to people that way…. replace a hated tax with a cheaper one….
So is tht £1,500 (average) in addition to council tax?
And who agrees the value?
And who will make good the shortfall of revenue to local authorities?
Completely replaces council tax and is the way that local taxes are raised instead. 0.5% of my current home value is nearly exactly what I pay in council tax.
People could be required to self declare.
If they cheat they are committing fraud with heavy dispossession penalties.
Perhaps require an official valuation every 5 years or so.
Property ownership needs enforced by society and it’s natural for it to have some overheads.
Like getting your gas boiler serviced….
A property value assessment is not much more expensive than a boiler service.
I realise my idea of heavy dispossession penalties as I describe them are pretty authoritarian but I think the costs of ownership should be borne by property owners.
I am a property owner and should pay for the privilege.
Up to average home value 0.5% is about equivalent to current council tax.
If it were progressive over that value I actually anticipate councils being able to increase their revenue from this tax versus council tax.
To be clear – the tax should be paid directly to local government.
Tax does not work like this, and I think society would not accept it. Tax is always, ultimately, by consent. And frankly, whilst there are problems with council tax replacing one version with another which could be much more unpopular would not work. Remember the poll tax. So, address top tier issues and problems with vacancies and lack of occupation, and look at other tax issues instead – which have vastly higher importance.
1. suggest, do not replace council tax, but increase for those with multiple wageearners, reduce for those on minor incomes such as OAPs.
2. you said “could increase costs passed onto tenants.” I disagree this is much of a factor, the landlords tend to charge what the market will stand in an area.
3. Anne’s suggestion 0.5% is too much across the board. An entirely practical MRIT is in place in West Australia (Perth) regionally at more like 0.25% of value which in UK could be got from recent LR figures of the property with Principle private residence exempt. AND there the landlord pays the council tax “Rates.” Still well profitable. The tax roughly doubles on 2nd rental property position (law requires landlord to notify – otherwise back-tax & penalties).
UK could have pro rata banding depending on size of portfolio and revenues allocated regionally in proportion to where collected. Otherwise its Rip-off Britain by the private sector, bigger landlords very much benefit rolling one property acquisition/improvement cost against income from another, as accountants well know. No wonder UK-Gov struggles, [and they still have not tackled hidden commercially-created bank £billions, pointed out as un-necessarily inflationary (hidden in top line of bank annual reports, contradicted by Bank of Eng’s “MMoney” also 2014 that say loans come first, then come back as deposits). Amounts suggested as “30 times growth in property prices in 30-years in some UK areas” by me. “Needs OFT” agreed by FSR team back in july 2007 and Steve Bakers Hansard record – in 2014 – on Money-creation (that’s not your public finance subject). Isn’t the FED being private (and state Feds, groups of commercial banks) the same but of course even worse? A global bank money (and now “cloud”) Problem. That’s why i suggested Discounted Directed Commercial money proposal to start the Rebalance (literature school fund-third) off. Example being 20-year money example £40k Ultra-Insulation “enveloping” with interseasonal wamth storage using the PVT flush-fitted (nationally) and summer [UK-limited] sunshine. GPG needs a talk on the phone. Dug-in insulation to retain the heat. Like WithoutHotAir.com – p300 approx with Calculation [STEERheat solves Mackay’s problem of “how to get the heat in fast enough?” and *how not to have to knock down the houses and apt blocks* by 2030 or 2050s!]
While Eco-Fit ultra-insulation would be a start, people Would Consent to a minor chgarge on landlords, say £1000p.a rising to £2000p.a when they have 2 rentals [£4000 on such a pair] . Income on rental min £8000p.a in Midlands property – £16000, the pair see also other posts. Richard’s “Tax does not work like this, and I think society would not accept it. Tax is always, ultimately, by consent.” could be contested somewhat. Especially as AFTER ecofit process starts the local revenues if Green and public good One-Third Principle then extended to: on all money created. Could be made to help councils.. This would be New and green-deal-like facilitation. thank you.. Amazing progress, esp your Note on the exchange of Memorandum process some while ago.. best wishes
Thanks, Ian.
Go well
Thanks for the answer! It seems like it could have some benefit but is largely exaggerated by its proponents.
I’m freaked by us discussing yet more tax. Taxation is at an all time high, yet we are discussing yet more tax. I hope Rachel Reeves is sent listening, she doesn’t need anymore help to tax us into poverty, that’s about the only thing this is succeeding at.
We are a lowly taxed country by European standards.
No, by European standards, the lower earners and the mid earners are under taxed, but higher earners are over-taxed.
But that’s the opposite of the message you keep trying to portray, which is somewhat inconvenient for you.
How can you square this circle?
I don’t need to. It’s not true. See my research in the Taxing Wealth Report.
I always refer to LVT as “London Values Tax” because that is where it hits hardest. If you want to know the value of your land, take the price of your house and subtract the rebuilding cost, which you can work out because it is part of your house insurance. This slightly underestimates the value of the land because rebuilding cost includes the cost of clearing the site, but that is a small part of the total rebuilding cost. In my experience much of the advocacy for LVT comes from people in areas where the land cost is very low.
For local government taxation, I would be happy with a modification to the existing Council Tax that retained the banding, perhaps added a few bands at the top for mansions and made the tax approximately linear with price at the band mid-point. The current ratios are a hangover from the old Poll Tax which is why single adults get a 25% discount (half of what they got under Poll Tax).
The benefit of land value tax is that it recovers for the community what the community has created, since the freeholder of land has an asset that appreciates in value because of the thriving society around it. However building values are created by the individual owner and should be taxed as lightly as possible to incentivise improvements. This is similar to the case of income through work which should be taxed less to encourage employment.
These facets can come together with benefit to society and individuals, by imposing LVT as an extra tax with the ability to offset it against income tax paid. That way for the average homeowner/earner there will be little difference in total tax paid and there would be less speculation in property. For cases of low earning freeholders in high value homes there should be the option of delaying full or part payment, with interest on the balance, until the sale of the home. Stamp duty should be abolished with this reform.
Initially LVT could be levied as a proportion of the readily available online value, say at 20% of the current [land + house] value. E.G. ‘Property’ value £500,000, land value at 20% = £100,000, LVT charge 1% i.e. £1000 land value tax but allowed against income tax. A tax shift away from property speculation in favour of work.
This is theory.
I live in the real world.
Regarding the difficulty of agreeing on a valuation of land or property, I’ve seen it suggested that one way to short-circuit this is for the owner to name their own price, on the understanding that they would consent to sell it for that amount. Coupled with legislation on Compulsory Sale Orders, this would place the onus to agree a fair valuation on the owner.
I am not sure such a process would withstand legal challenges. That is why I no longer talk about it.
Thanks for retaining my STEERheat comment above, which could increase the real value of homes by reducing cost of living especially aimed at those renting [Theresa May’s JAMs, in the jam of paying rent forever, worse condition, really, than her ‘just-about-managing” term]. At minimal cost to owners, discounting some of the “private” [bad term] commercial-bank money like Bank of England implied in 2014 (saying “cancelled” at end of term) for extrra-special purposes. Indeed it could be so, cancelled for extra special purposes such as getting off gas, for giant heat stores and at green-deal-like discounted interest, by my calculation at 1.5% real green deal for thorough job AND ‘green-and-public-good One-Third Principle starting on created money doing EcoGood with the 0.5 part going to primary-schooling reducation against waste, consumerism (see Ruskin’s ILTH description, definition, etc).
From the 0.5, on typical £40k at 1.5% (£400.00 per annum for 20 years to banks still in the habit of writing a number to a screen based on the “borrowers” ability to pay – an “undemocratic” control) – local school could get a minor £200.00 p.a rising to £10,000 p.a as 50 nearby properties improved. At 500,000 a year (250,000 new intermediate-skill jobs quite quickly, that’s a lot of solid education/skill possible nationally. That is a real-world opportunity, a gift Treasury could give via MoU to BoE, dont you agree? “Deficit-reducing via real growth at no public-finance cost” using fresh commercial-bank money that ends at end of term (not just cancelled from accounts). simple!
Re LVT, In the same way as sale prices are currently recorded at Land Registry, adjustments in the case of the sometimes long period before resale puts figures out of date, so adjustments could be made based on similar land/house sales nearby.
Furthermore a limit of Value of land as being 40% of sale of house and land might be reasonable, adjusting for size of building in each case, a bit like Charles B’s 20% above, but then i am only suggesting only on Owners paying where renting to tenants [and “progressive” minimal on small portfolios at least double the rate to 0.5% on larger holdings]. .
Secondly, worth pointing out landlord would only pay trivial £50.00 p.m on £40k sum of created money, equivalent to more meaningful £50.00 p.m savings to those renting, often in the poorest accommodation, heat-leakily. Ta!