Labour’s autumn Budget is fast approaching, with dozens of potential measures floated in the build up to the major fiscal event.
Chancellor Rachel Reeves may need to identify at least £22bn in new funds at the event as weak growth forecasts limit the government’s financial flexibility the Institute for Fiscal Studies (IFS) recently found.
Economists have scrutinised how property is taxed as Ms Reeves considers her options for 26 November, with many pointing to ways more revenue could be raised from people’s homes. Ministers have insisted that any tax rises should be focused on those with the most wealth, as living standards in the UK continue to drop.
One of the ways Treasury is understood to be looking to achieve this is through a new levy on high-value properties, which some have called a ‘mansion tax’.
Different versions of how the tax could work have been floated, both with the potential to raise considerable sums for the exchequer.
Most recently, the chancellor is understood to be considering a major overhaul to the council tax system, which would concentrate on higher-value homes.
This would see all 2.4 million properties in the highest tax bands in England undergo revaluation, and an increase to the rate of the 310,000 most expensive properties (valued at over £1.5 million).
The plan would raise around £600 million a year, per The Times, and result in a bill of an extra £2,000 a year for high-value home owners.
David Fell from the estate agency Hamptons said: “I think the government is saying that the current council tax bandings are going to be used as a guide, but they are not enough on their own to value homes accurately. It sounds like it is looking to revalue about 2.4 million homes, with a new levy imposed on about 300,000 worth £1.5 million or more.”
However, a simpler proposal also thought to be under consideration is to introduce a levy on owners of properties worth at least £2 million, with an annual charge of one per cent of the amount over that threshold. This would mean a £10,000 yearly fee for homeowners with a property worth £3 million, for instance.
There are around 150,000 homes that fall into this price range, according to data from estate agent Knight Frank, the vast majority falling within London and the South East.
Tom Bill, head of UK residential research at Knight Frank, said: “Thirteen years since the Liberal Democrats first proposed a Mansion Tax on properties over £2 million, the Treasury is reportedly considering the same plan.
“Even the proposed threshold is identical, which tells you everything you need to know about house price inflation since 2012. Average values in prime central London have fallen by 8 per cent over the period.”
