Rachel Reeves ‘eyes tax raid on expensive homes’ in crunch Budget
Rachel Reeves is reportedly considering introducing new, higher council tax bands to target owners of expensive homes.
With weeks to go before his budget is due to be tightened, the chancellor hopes new high council tax bands will help him plug a tens of billions of pounds shortfall in the country’s finances.
No decisions have been made but Ms Reeves said higher taxes on the wealthy would be “part of the story” in the November 26 Budget.
Economists have repeatedly warned Ms Reeves in recent months that Labour’s combination of U-turns, high debt and slow economic growth meant she would have to raise taxes or scrap flagship borrowing rules.
The FT quoted one source as saying: “The idea of increasing taxation on high-end homes is well established. The debate is about how you do it.”
It is stated that the move will lead to an increase of several billion pounds. Financial Times.
How much homeowners pay in council tax, a tax levied on residential properties by the local authority, depends on the band, with band A for the lowest-valued properties up to band H. But the system has been heavily criticized for being based on the value of properties in 1991, before a major boom in recent years.
Properties currently in band H are properties valued at over £320,000 in 1991.
The idea of creating new council tax bands for England’s most expensive homes was first considered by the then Conservative Chancellor George Osborne in 2012.
He supported additional council tax bands, with the money going to the Treasury rather than local authorities. To overcome some of the problems such a system was expected to create, elderly and other “cash poor” property owners would be allowed to defer their high council tax bills until their death. However, Prime Minister David Cameron eventually blocked the plan.
Michael Sherwood, a former Goldman Sachs executive, told the FT that council tax was “very unfair”, adding: “If you have more expensive homes, you should pay more for them.”
Ruth Curtice, chair of the Solution Foundation think tank, said: “This alone won’t solve the property tax mess, but we’re already paying council taxes and you’ll be asking the rich to pay a bit more.”
Lucian Cook, of estate agent Savills, said: “Additional council tax bands would potentially be less damaging than pure mansion tax.”
Edward Troup, a former senior civil servant at HM Revenue and Customs, said higher taxes on expensive homes could help Ms Reeves if the government also had to tax what it described as “working people”.
He said: “The idea of introducing an effective and painful mansion tax on the rich feels like part of a coherent political package.”
The Scottish government is also consulting on the idea of introducing extra council tax bands as it aims to make its property tax system more progressive.
The Treasury was contacted to get an opinion on the issue.
