The Chancellor is reaching for any ideas that could help her fill her new £50 billion black hole – and Britons will pay the price.
Rachel Reeves has been accused of planning a new punishment tax on homeowners as she scrambles to fill a mega £50 billion black hole of her own creation. According to bombshell reports, the Chancellor is eyeing up two massive tax overhauls to both Stamp Duty and Council Tax, in an effort to rake in billions more for her spending priorities.
The Treasury is now looking at a major change to Britain’s property taxes, ahead of the Budget, which many argue are flawed as they reduce house sales and provide a highly inconsistent revenue stream for the government. However the Conservatives are warning that “the family home is next in the firing line” of tax-loving Labour. Shadow Chancellor Mel Stride blasted: “This tax grab would punish families for aspiring to own their own home. Under Labour nothing is safe. Your home, your job, your pension – the Chancellor has all of it in her sights.
Rachel Reeves could hike taxes on more expensive homes (Image: Getty)
Mel Stride says the family home is next in the tax firing line (Image: Getty)
“Rachel Reeves will tax your future to pay for her failure.”
The current Stamp Duty levy is paid by house buyers when purchasing a property over £125,000, or £500,000 for first-time buyers. From there, rates begin at 2% up to £250,00, 5% up to £925,000, 10% up to £1.5 million and 12% on anything beyond that.
Ms Reeves is instead looking at replacing this with a new simpler system, that would be paid by the property owners upon selling their house.
The national property tax would be paid by owner-occupiers on houses worth more than £500,000, directly collected by HMRC, while stamp duty would remain for purchases of second homes.
The Treasury believes that while this new system would raise similar amounts to Stamp Duty, it would be a more reliable and consistent source of revenue.
It would only affect around one in five house sales, compared to Stamp Duty applying to 60% of sales.
The move would be bad news for those in Britain’s most expensive properties (Image: Getty)
According to the Guardian Ms Reeves is also examining proposals for a radical overhaul of Council Tax, which could be replaced with an annual local property tax following the introduction of her proposed property tax.
Council tax is under huge fire by Labour MPs, as many of the poorest homes pay more each year than mansions in central London.
The current rates were set in 1991 and haven’t been updated since, due to fear of political backlash by affluent voters in the south.
The Treasury document examining a new council tax system is based on a report by the centre-right Onward think tank, which proposed that owners of property up to £500,000 paying rates of tax based on the value of their home.
The minimum annual charge would therefore be set at around £800 a year.
Onward’s paper explained: “It means homes in Barnsley, where few pay stamp duty, would be valued high enough to start paying a national property tax. Such an approach would better fund local authorities without councils in poorer areas setting a high value or relying more on central Government handouts. It would also avoid a scenario where the majority of property taxes for people living in affluent areas would go to the nation’s coffers instead of funding local services.”
However the paper also called for anyone who has paid stamp duty on their current property to be exempt, so they aren’t taxed twice.
The move could placate hard-left MPs like Richard Burgon calling for wealth taxes (Image: Getty)
The move could also help cool tensions in the Labour Party, as property taxes are a form of wealth tax that many Labour MPs have been calling for.
However it’s a political risk, as wealthy southern homeowners in constituencies that voted Labour for the first time last year could switch their allegiances, and it would likely take another term in office for Ms Reeves to complete.
A spokesman for the Treasury said: “As set out in the plan for change, the best way to strengthen public finances is by growing the economy – which is our focus. Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8bn and cut borrowing by £3.4bn.
“We are committed to keeping taxes for working people as low as possible, which is why at last autumn’s budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee national insurance or VAT.”
