Rachel Reeves could hit more than 100,000 high-value properties with a mansion tax at this week’s Budget as she seeks to raise money to fill her financial blackhole.
The chancellor has reportedly scaled back plans for a property tax but is now expected to apply a tax to homes worth more than £2 million in a move which could raise between £400m and £450m for the Treasury.
Some 2.4 million properties in the top three council tax bands – F, G and H – will be revalued to determine which will be subject to the surcharge, which will be worth an average of £4,500, according to The Times.
People will be able to defer the cost until they die or move house to avoid forcing them to sell up, according to the newspaper.
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Earlier reports had suggested that a mansion tax would apply to homes worth more than £1.5million and would have pulled tens of thousands more households in. But The Times reports that the threshold has been raised amid concerns it could affect those who are “asset rich and cash poor”, particularly in London.
But the budget watchdog, the Office for Budget Responsibility, is said to be concerned that the plans could lead to a slowdown at the top of the housing market.
The rumours around a mansion tax are one of many that have hit the headlines ahead of the chancellor’s speech on Wednesday.
The lead up to the fiscal event has been rife with rumours about what could be to come, including the expectation – and then apparent U-turn on – an increase to income tax.
On Monday morning, business secretary Peter Kyle apologised for the speculation around the Budget and said that rumours have been “as frustrating for me and the chancellor as it has for everyone else”.
He told BBC Breakfast there is “intense pressure” on ministers to be “open about the direction of travel… while staying within the confines of what’s acceptable for a Budget”.
Among the “smorgasbord” of tax rises which are expected, Ms Reeves is also set to scrap the two-child benefit cap.
Mr Kyle told the BBC on Monday: “I am sorry that there’s been so much speculation, there has been intense speculation around this Budget simply because it is an important moment for our country.”
He said that ministers are “trying to get a grip” on the cost of living and tackle issues like national debt.
“I’m sorry that people have been anxious about all the speculation, it’s been as frustrating for me and the chancellor as it has for everyone else.”
Asked whether he thought Ms Reeves had added to the uncertainty with her apparent laying the groundwork for an income tax rise earlier in the autumn, Mr Kyle said: “We do interviews like this and we are asked about measures and there is intense pressure on us to be open about the direction of travel.
“When we try to be as open as we possibly can while staying within the confines of what’s acceptable for a Budget, of course it just generates more speculation, not less. We’re trying to get that balance right.”
It comes as CBI boss Rain Newton-Smith will tell ministers and business leaders on Monday that firms are concerned the UK could “risk getting locked in a stop-start economy”.
She is also set to encourage the government to make “hard choices” and avoid “death by a thousand taxes”. The trade body is set to specifically call for action on business energy costs and the Employment Rights Bill.
Initial measures linked to the Bill, such as day one paternity leave and changes to statutory sick leave, are due to come into force in April next year.
Further measures, such as banning unfair zero hours contracts, are expected to be introduced in 2027.
However, the bill has faced criticism from employers over increases in business costs and complexity.
Ms Newton-Smith said the legislation is “damaging” and called for a change in direction from the Government.
Ms Reeves is grappling with weak economic growth and persistent inflation as she prepares the Budget, with a “smorgasbord” of smaller tax increases now expected after the scrapping of the income tax plans.
She is thought to be considering bringing in a pay-per-mile tax for electric vehicle drivers and limiting how much workers can stash in their pensions under salary sacrifice schemes before paying national insurance.
And she will reaffirm the government’s commitment to the triple lock on state pensions, and confirm that 13 million pensioners are set to benefit from an above inflation rise next April.
An extension of the freeze on income tax thresholds is also among rumoured measures and would see more people dragged into paying tax for the first time or shifted into a higher rate as their wages go up.
