London Heathrow Airport in the UK has announced a new compensation package for people who would be most affected by the expansion project in a submission to the Airports Commission this week.

Heathrow Airport noted that 750 homes would have to be compulsorily purchased to provide space for a third runway at Heathrow.

The new compensation package offers a compensation of 25% above un-blighted market value along with stamp duty costs, as well as all legal fees in relation to purchasing a new home.

This means that a £250,000 property homeowners would receive £312,500 compensation, in addition to £7,500 stamp duty costs and any legal fees.

"Since the previous runway plan was rejected in 2010, we have listened to ideas for how we could improve our proposals."

According to Heathrow Airport, the proposal is better compared with the previous proposal for a third runway, and proposals for most other infrastructure projects, as compensation for residential property is generally offered at a statutory minimum of 10% above market value.

The airport has also announced the creation of a total fund of £550m for noise insulation and residential property compensation if government supports a third runway.

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The fund will be used by the airport to provide noise insulation and compensation for residential properties, as well as for community buildings such as schools.

The new fund is a major step up from the previous proposals for a third runway, which allocated £90m for noise insulation and compensation.

Heathrow chief executive Colin Matthews said: "Since the previous runway plan was rejected in 2010, we have listened to ideas for how we could improve our proposals.

"People have told us that we should provide more generous compensation and go further in insulating homes against noise."

"We recognise that the expansion of Heathrow deserves an exceptional compensation scheme. That’s why we’re going further than statutory schemes or government guidance. People will receive fair compensation in the event that Heathrow expansion goes ahead."

Heathrow airport now plans to now work with a panel of community representatives to decide on how the fund should be distributed.

Heathrow will also launch a public consultation this summer on more detailed proposals for noise insulation and residential property compensation.