Fears have been raised that Rachel Reeves could mount a new push for a ‘mansion tax’ after the Tories vowed to abolish stamp duty.
Kemi Badenoch put property taxes firmly on the agenda with the bold pledge in her conference speech yesterday.
And the move has sparked fresh speculation that the Chancellor – who is scrambling to fill an estimated £30billion hole in the public finances at the Budget – will unveil a huge shake-up.
The IMF has urged an overhaul of property tax, and the Treasury has not denied reports that an annual charge based on value is being considered.
That would go some way to appease Labour MPs who have been baying for so-called ‘wealth taxes’ to fund more spending.
However, it would potentially mean households paying thousands of pounds a year, depending on the exact shape of proposals. Critics have warned that people in areas where prices are high, such as the South East, and pensioners on fixed incomes would be particularly hard-hit.
Last year the Tony Blair Institute proposed a levy worth 0.5 per cent of the value of each property, to replace council tax.
The think-tank suggested a minimum payment of £1,350 for properties worth less than £270,000, and a maximum of £6,250 over £1.25million.
The report estimated that 4.1million people in larger homes would end up paying significantly more, although 12million would have lower bills.
The change was praised as potentially boosting growth by giving an ‘incentive for older homeowners in high-value properties to downsize’.
A separate blueprint from the Onward think-tank – said at one point to have gained traction in the Treasury – would see proportional annual payments up to a property value of £500,000.
The report estimated that would need to be 0.44 per cent to replace council tax revenues, with a minimum annual payment of £800.
There would be a 0.54 per cent annual charge on the portion of the property value between £500,000 and £1million, and 0.81 per cent above that.
Onward said that those thresholds would be cost neutral for the government, although exempting those who had already paid stamp duty on their homes would create an initial shortfall.
ITV’s Robert Peston said the axing of stamp duty was being considered in No11 as part of a ‘wider reform of taxation on housing’ including the imposition of a new annual tax on the value of more expensive properties. However, he questioned whether the plan would be ready in time for the Budget on November 26.
Ms Reeves told the Treasury Committee after the Budget last year that officials had proposed replacing council tax with a ‘broad-based property tax’. But at the time it was ‘not something that we wanted to take forward’.
Another option often mooted to raise revenue is adding an extra council tax band for the most expensive properties, as has already happened in Labour-controlled Wales.
Tory MP Harriet Baldwin told the Daily Mail: ‘Rachel Reeves is clearly looking everywhere for new things and new ways to tax – your business, your farm, your pension, your home.
‘Nothing is safe from her desperate, growth-destroying Tax-zilla budgets.’
