Chancellor eyes up mansion tax as she takes aim at middle class
Rachel Reeves is reported to be looking to introduce a new mansion tax in next month’s Budget. Owners of properties worth £2m and above could face a charge of 1 per cent of the amount by which the property exceeds that value, under the proposals. Meanwhile, owners of a £3m property will face a bill of £10,000 every year, according to the Mail on Sunday. People who own homes worth tens of millions and second home owners would also pay higher rates. Lucian Cook, the head of residential research at estate agent Savills, said: “There’s a big difference between someone in a £2m house without a mortgage and someone with a sizeable mortgage. So it doesn’t necessarily capture net wealth at all.” Neal Hudson, the founder of housing market data firm Residential Analysts, added: “There’s a danger this will have some fairly negative impacts. The top end of the market has been stagnating for the last decade already as it’s been hit by higher rates of stamp duty.” It comes as Labour opened the door to the introduction of a “house price tax” that would hit the middle classes. Ministers have said they are “considering options for reform” in the clearest indication yet that new property levies will feature in the Budget next month. The remarks will further stoke fears that the Chancellor is planning a raid on assets including homes to fill a £30bn black hole in the public finances. It follows reports that the Chancellor is looking into whether to scrap council tax and replace it with a new annual charge based on house prices. A minister made the comments after the Tories asked them whether they had made any assessment of the potential impact of such a reform. Alison McGovern, the local government minister, replied: “The Government remains committed to keeping all taxes and elements of the local government finance system under review. “The Government will continue to monitor the effectiveness of the system and consider options for reform where there is clear evidence that change would deliver better outcomes for residents and councils alike.” Her remarks appear to represent a marked change in the official government position over the summer, when her predecessor in the role was highly dismissive of the idea. Jim McMahon said in response to a separate question back in July on the issue: “The Government currently has no plans to reform council tax.” There have been warnings that switching to a value-based property levy would disproportionately hit middle-class homeowners. Under that system, people with large gardens or those who carried out home improvements which boosted their house price would pay more. Plans have also been floated to replace stamp duty with a new proportional tax on the value of homes which are sold for more than £500,000. James Cleverly, the shadow housing secretary, said the reforms would be “anti-aspirational” and further punish already squeezed middle-class households. “Just weeks ago we learnt of Labour’s secret plot to hike council tax by a staggering £11bn over this Parliament,” he said. “This is anti-aspiration and will inevitably result in higher costs for Middle England.” Government insiders have previously suggested that any overhaul of council tax would be a long-term project that may require Labour to win a second term. A Treasury spokesman said: “The Chancellor makes tax policy decisions at fiscal events. We do not comment on speculation around future changes to tax policy.”