Reeves set to tax 100,000 aspirational homeowners | UK | News

Chancellor Rachel Reeves will hit more than 100,000 of Britain’s most expensive homes with a hefty surcharge that will cost an average of £4,500 per household as she tries to balance the books by cracking down on the wealthy, The Times reports.

To soften the blow, Reeves scaled back his controversial property tax plans, raising the threshold at which the tax kicks in from £1.5 million to £2 million to ensure the most expensive homes are targeted.

The Treasury is using the revamped ‘mansion tax’ to provide a much-needed £400-450 million, and the additional charge will be reflected in council tax bills. Homeowners at the top of the property ladder will be hit hardest and face significantly higher bills.

Reeves plans to piggyback on the current council tax system by ordering a revaluation of 2.4 million of the country’s most valuable properties in groups F, G and H to pave the way for a controversial cash grab.

Tax increase for 100,000 houses

More than 100,000 of the UK’s most expensive homes will be slapped with eye-watering fees and the Treasury is expected to use an ascending band scale based on property values ​​to determine the final bill.

Reeves had initially introduced a much more comprehensive version of the tax; this tax would start at £1.5 million and trap 300,000 households. But fears that the move would unfairly penalize “asset-rich and cash-poor” homeowners, particularly in London, have led to a rethink and a higher threshold.

Postponement option to avoid forced sales

To avoid forcing cash-strapped residents to sell just to cover the cost, the government will give homeowners the option of deferring tax increases until they move homes or die.

However, the Office for Budget Responsibility (OBR), the Treasury’s budget watchdog, has warned that ‘mansion tax’ plans could curb the housing market, the Times has learned.

The OBR has raised the alarm about the potential “behavioral impact” of the policy, expressing concerns that the surcharge could lead to a decline in sales of senior properties. But a government insider insisted the negative impact on the housing market would be “minimal”.

There is also the fear of a “picking up” as savvy homeowners try to game the system by keeping property prices just below the threshold for high tax rates.

“The OBR has taken into account a behavioral response to this that will have a knock-on effect on the housing market. This has a wider impact,” a Whitehall source said.

The long road to implementation

But homeowners won’t need to start counting their money just yet, as the controversial policy is unlikely to come into force until 2028 at the earliest (once the planned revaluation of the top three council tax bands is completed).

Savills’ head of UK housing research, Lucian Cook, warned against any moves that could “undermine the housing market” at a time when the government is pushing to build 1.5 million new homes.

He branded the ‘mansion tax’ a ‘compromise measure’ more concerned with ‘correcting the perceived wrongs’ of the council tax system than a serious attempt to replenish the Treasury’s depleted coffers.

Uncertainty ‘could throw a spanner in the works’

Tom Bill, Knight Frank’s head of UK housing research, warned that the lengthy revaluation process would increase uncertainty and “throw a wrench in the works” of high-stakes property negotiations.

“Once the revaluation occurs, you again face the issue that this may be challenged, particularly around the thresholds. We may be faced with a quite long and complex process that does not deliver what the government thinks it will in the short term,” he warned.

The controversial ‘mansion tax’ is just one part of the painful ‘smorgasbord’ of tax rises Reeves is preparing to unleash in his upcoming budget after Labor was forced to abandon a plan to break its key manifesto pledge and raise the basic income tax rate.

Reeves has pledged to increase support for welfare recipients while protecting low-income earners from the worst of the tax onslaught. He promised to remove the two-child cap on benefit payments (a move that would cost the Treasury around £3bn a year) and increase benefits in line with inflation.

But middle-income earners are firmly in the firing line as Reeves prepares to freeze income tax thresholds for two years until 2030. This hidden tax grab will push people into higher tax brackets as pay packets grow but the thresholds will remain frozen, resulting in an £8-10 billion boost for the Treasury.

The move will see the number of top taxpayers rise to more than 10 million by the end of the decade.

Pension raid and taxes on gambling, electric vehicles and tourism

Reeves is also planning a multi-billion pound raid on pension contributions, a new tax on gambling companies, a pay-per-mile tax on electric cars and a controversial tourism tax as he desperately tries to repair the gaping hole in the country’s finances.

Paul Johnson, former chairman of the Institute for Fiscal Studies think tank, said the Chancellor’s U-turns on welfare meant he would face a whopping £10bn a year of additional spending over the forecast period.

“At best, there is no effort to reduce welfare spending and the net effect will be an increase due to the decision to remove the two-child limit,” he warned.