Rachel Reeves will target middle-class families with new £600million ‘mansion tax’ that will hit one in 10 homes
Rachel Reeves is set to target middle-class families by introducing a new tax on hundreds of thousands of homes in the budget in a bid to raise £600 million.
It is believed that one in ten homes in England currently designated as Band F or above for council tax will be revalued and could be under threat of a surcharge.
Although dubbed a ‘mansion tax’ by Labor insiders, it is argued that this tax will only affect the wealthiest, although some of the 1.3 million middle-class families living in Band F properties will also be affected.
The surcharge is expected to affect families living in London and the South East, where house values are higher.
They could face surcharges of hundreds of pounds a year on top of bills that currently average £3,293.
Meanwhile, the majority of the more than 150,000 homeowners living in the most valuable properties in Bands F, G and H face paying thousands of pounds more each year.
Around 2.4 million of these properties, representing one in ten British homes, are expected to be revalued by the Treasury so they can collect the tax.
In this case, the council tax surcharge is likely to apply to around 300,000 of the most valuable homes.
Rachel Reeves is set to target middle-class families by introducing a new tax on hundreds of thousands of homes in the Budget in a bid to raise £600 million
Reeves sees it as one of a series of measures to raise funds to raise an estimated £25bn to shore up the country’s finances after abandoning a plan to raise income tax.
Experts warn that the uncertainty the new tax could impose on millions of homeowners could be disastrous for the property market.
The system could see up to a quarter of homes being revalued in some areas, while more than 15 per cent of all homes in London and the South East would fall under the new tax.
Shadow chancellor Sir Mel Stride accused Labor of waging ‘class war against middle England’.
He told the Telegraph: ‘If Starmer and Reeves decide to launch a new tax raid on family homes they will punish ambition and hit hard-working people.
‘Nothing is safe under Labour; your job, your home, your savings or your retirement.’
After the Treasury confirmed last week that the income tax would not be increased on November 26, the ‘mansion tax’ raid came to the table as one of the other possible tax measures.
The controversial planned income tax increase of 2p per pound would be in direct contradiction to Labour’s manifesto promise.
But the Office for Budget Responsibility (OBR) is believed to have concluded it will not generate as much money as expected.
News that the widely anticipated rally had been canceled triggered accusations of a chaotic economic strategy and markets were thrown into turmoil.
This was exacerbated by fears of a leadership coup against the Prime Minister.
Britain’s council tax system has been on Labour’s radar because it is often described as ‘regressive’ by economists.
It is based on property values in 1991 and means people living in smaller homes pay proportionately more tax than those living in larger properties.
Other options considered following the review commissioned by Sir Keir’s chief economic adviser, Minouche Shafik, include a full revaluation of the properties.
Earlier this month, Ms Reeves was photographed leaving Downing Street with part of her diary visible and the word ‘Thresholds’ describing a meeting.
But a separate surcharge is currently seen as the most effective way to raise extra money. While higher property taxes are certain to come into the budget, the details of any plan could change, sources say.
Any new tax would follow a reassessment by the Valuation Office Agency and is unlikely to be introduced until 2028.
It is understood the new tax could also be deferred until homeowners move into their homes or die.
Shadow Chancellor Mel Stride told the Daily Mail: ‘We are witnessing the most chaotic pre-Budget period in memory.’
‘Constant leaks, briefings and kite-flying increase uncertainty and damage our economy.
‘Markets are unnerved and business confidence is at a record low. This is chaos on an industrial scale. ‘We are becoming an economic laughing stock under Labour’s rule.’
Former chancellor Sir Jeremy Hunt told Times Radio: ‘The whole world is reading this and looking at British economic decision-making.
‘And the situation seems very chaotic and I don’t think that’s a good thing.’
