Rachel Reeves to hit 100,000 high-end properties with mansion tax in Budget
Rachel Reeves could hit more than 100,000 high-value properties with a mansion tax in this week’s budget as she tries to raise money to fill her financial black hole.
The Chancellor has reportedly scaled back property tax plans, but is now expected to impose a tax on homes worth more than £2 million, in a move that could raise between £400 million and £450 million for the Treasury.
According to The Times, around 2.4 million properties in the top three council tax bands (F, G and H) will be revalued to determine which will incur a surcharge, which will be worth an average of £4,500.
According to the newspaper, people will be able to defer the cost until they die or move house to avoid having to sell them.
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Previous reports had suggested that the mansion tax would be imposed on homes worth more than £1.5 million, attracting tens of thousands more households. However, The Times reported that the threshold was raised due to concerns it could affect the “asset rich and cash poor”, particularly in London.
But budget watchdog the Office for Budget Responsibility is said to be concerned the plans could lead to a slowdown at the peak of the housing market.
Rumors about a mansion tax are one of many to hit the headlines ahead of the Chancellor’s speech on Wednesday.
The lead-up to the fiscal event has been filled with rumors of what might happen, including the expected rise to income tax and the apparent U-turn that would follow.
On Monday morning, Business Secretary Peter Kyle apologized for speculation about the Budget, saying the rumors were “as frustrating for me and the chancellor as they are for everyone else”.
He told BBC Breakfast there was “intense pressure” on ministers to “be clear about the direction of travel but also stay within acceptable bounds for the Budget”.
Among the expected tax increases, Ms Reeves is also expected to remove the two-child benefit cap.
Mr Kyle told the BBC on Monday: “I’m sorry there’s been so much speculation, there’s been intense speculation around this Budget simply because it’s an important moment for our country.”
He said ministers were “trying to get a grip” on the cost of living and addressing issues such as the national debt.
“I am sorry that people are worried about all this speculation, it has been frustrating for me and the chancellor as much as it has been for everyone else.”
Asked whether Ms Reeves was increasing uncertainty by paving the way for an income tax increase in the early autumn, Mr Kyle said: “We have conversations like this and we’re being asked about precautions and there’s intense pressure on us to be clear about the direction of travel.
“When we try to be as open as possible while staying within the bounds of what is acceptable for a Budget, of course that creates 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 “may risk being locked into a stop-start economy”.
It will also encourage the government to make “hard choices” and avoid “death by a thousand taxes”. The trade body will call for action, particularly on business energy costs and the Employment Rights Bill.
The first measures linked to the bill, such as the first day of paternity leave and changes to statutory sick leave, are expected to come into force in April next year.
Additional measures, such as banning unfair zero-hour contracts, are expected to be introduced in 2027.
However, the bill has faced criticism from employers due to increased operating costs and complexity.
Ms Newton-Smith said the legislation was “damaging” and called for a change of direction from the Government.
Ms Reeves is grappling with weak economic growth and stubborn inflation as she prepares the Budget; A “buffet” of smaller tax increases is expected following the scrapping of income tax plans.
It is thought to be considering introducing a pay-per-mile tax for electric vehicle drivers and limiting how much employees can save in their pensions under salary sacrifices before paying for national insurance.
It will also reaffirm the government’s commitment to introduce a triple lock on state pensions, confirming that 13 million pensioners will benefit from an above-inflation increase next April.
An extension of the freeze on income tax thresholds is also rumored and we will see more people being dragged into paying tax for the first time or moving to a higher rate as their wages rise.
