Latest news with #mansiontax
Telegraph
7 hours ago
- Business
- Telegraph
Reeves eyes property tax raid on the wealthy
Rachel Reeves is drawing up plans for a fresh raid on homeowners in the Budget as she struggles to balance the books and grow the economy. Treasury officials are expected to push the Chancellor to consider a mansion tax on property sales as well as more radical options including annual levies that would disproportionately hit homeowners in London and the South East. It is understood Ms Reeves has ordered officials to review Britain's complex web of property taxes ahead of the Budget in order to identify ways to boost the economy. Economists have warned that the current system is holding back growth. Improving productivity will form a key plank of Ms Reeves's second Budget and changes to the property tax system are expected to form part of these plans. The International Monetary Fund (IMF) and Institute for Fiscal Studies (IFS) have both called on Ms Reeves to scrap stamp duty on house sales, with the think tank branding the levy Britain's 'worst and most damaging tax'. Experts say the tax discourages people from moving, with a knock-on effect for the broader dynamism of the economy. Sources said any changes would be designed to 'protect revenue', in a clear sign that taxes on higher-value properties will have to rise if the Chancellor does overhaul the system. Property taxes including stamp duty are forecast by the Office for Budget Responsibility (OBR) to raise £15.7bn this year, rising to £26.5bn by the end of the decade. Council tax is forecast to raise £50bn this year. The desire to protect this tax income raises the prospect of the Chancellor introducing new council tax bands on the highest value properties in England, or a more radical recurring property tax on homes valued above a certain amount that could replace stamp and council tax. However, government sources vigorously denied a report in the Guardian that said the Treasury was examining proposals that would see sellers face a new 'national tax' on houses worth more than £500,000 when they sell their home. 'That's definitely not going to happen,' said one source close to the Treasury. Analysis of Land Registry data by Hamptons shows that 50pc of English home sales over £500,000 are currently in London, with a further 26pc in the South East. Treasury officials have pushed previous chancellors to replace stamp duty and council tax with an annual tax on property or land values. Such a move would prompt a political backlash. Margaret Thatcher was forced to shelve a fixed tax to fund council services in the 1990s after Conservative plans for a poll tax sparked riots. Scotland previously considered introducing a land value tax to replace council tax but ultimately moved away from the proposals in favour of higher bands of council tax. Official data suggests increasing council tax on bands F, G and H would hit more than a million homes across England and Wales. Sources close to HMRC also signalled that even simple reforms such as introducing new council tax bands could take more than a year to implement because it would take time for the Valuation Office Agency (VOA) to get up to speed. Sources close to Ms Reeves said she would be looking at property taxes as part of a wider review to boost growth. The Chancellor is under intense pressure amid warnings of a black hole of up to £50bn in public finances. Sir Mel Stride, the Tory shadow chancellor, said it was clear that 'more taxes are coming' under Labour. '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,' he said. 'Rachel Reeves will tax your future to pay for her failure.' Ms Reeves has previously called for reforms to the way Britain taxes property. Writing in 2018, she said: 'Council tax, based on 1991 valuations, is at the very least long overdue a re-evaluation and revision of existing bands – a power which could be devolved to local government to match local needs. 'We should also consider the case for its overhaul and replacement with a property tax, levied on property owners.' A Treasury spokesman 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.'
The Independent
06-08-2025
- Business
- The Independent
Rachel Reeves must learn a hard lesson from Labour history – wealth taxes simply don't work
On family holidays to Greece, we would look at the unfinished buildings with people living in them and revel in their laid-back attitude. Except they weren't, of course. What they were doing was avoiding paying tax on a completed property. With their climate, they could leave the ground floor open to the elements. Something similar occurred in England and Wales. Have you ever looked at old houses and wondered why they went to the trouble of putting in windows, only to block them up? That was because in 1696 there was a window tax – the more windows, the higher the levy. So, they filled them in. Same in Scotland, where they removed the roofs to avoid property tax. That's why so many castles have fallen into ruin. It will occur again if the left get their way and impose a mansion tax. Some bright spark will come up with a ruse for escaping the charge, probably finding a loophole in the precise definition and how it's phrased, and a scheme will take off and be heavily exploited. This is always how it is. In every country in the world, the national sport is minimising tax legally. Going down the illegal route is different and dangerous. Staying within the law is seen as fair game – at least for those who can afford to employ wealth advisors who specialise in bending the rules. Which is why the current push for the imposition of more taxes on the well-off will backfire. This is what Rachel Reeves, the chancellor, is grappling with. Faced with an estimated £41.2bn deficit in the Treasury's account, she is considering how to plug that yawning chasm. She can raise taxes, slash spending or increase borrowing. Most probably, Reeves will select the first, whacking up taxes. At this point, the siren voices clamour for ordinary folks to be excluded and for the rich to bear the burden through raising the highest rate of income tax and targeting capital gains and inheritance duties. They won't notice it, is the mantra. Taxing the rich plays as well to the redistributive ideological belief. What's not to like? Except, they will notice it – and they will do their utmost to dodge the bullet. A previous Labour government under Harold Wilson hiked income and investment taxes to a combined 98 per cent, so Reeves has plenty of room to work with, in theory. Because how many people have ever paid that amount? Very few, if any. The tax avoidance industry – and it is an industry – received its biggest fillip, devising all sorts of wheezes. Meanwhile, the Tories delighted in highlighting the disincentivising of profit and wealth creation, the long-term economic damage it was causing. Eventually, in 1979, Margaret Thatcher drove Labour from office. So much for egalitarianism. It is ever thus. Remember how a few decades ago, all manner of unlikely individuals, among them Terry Wogan, Cliff Richard and Phil Collins, popped up as owning swathes of forest in Scotland? Or how backing films that never seemed to gain wide distribution, let alone make money, was the thing? Not so long ago, under Gordon Brown's administration, the UK possessed the longest tax directory in the world, greater even than India's, at 11,520 pages. We also control some of the globe's most accommodating tax havens in the Channel Islands, Isle of Man, British Virgin Islands, Gibraltar and Cayman Islands. There is plenty of scope for wriggling. But this time, there is an added risk. Many will vote with their feet and quit the country, something made much easier by today's tech and transport and aided and abetted by other nations dangling carrots to persuade them to relocate. Since last year's October Budget, reports today's Financial Times, some 3,790 company directors have gone. Some were non-doms who had their favourable tax status removed; the rest, most probably, were wealthy people who were subjected to Labour's other measures aimed at them, saw the likely future direction of travel, and quit. As one bank CEO told me, they are in no doubt that should Reeves go for unearned income, by hitting company dividends, say, investors will leave. The 'flight risk ', as he put it, is real. If Reeves is panicked into a wealth tax, she risks a massive exodus and little cash reward for her efforts. No, the socialist heart may not like it, but the only realistic selection Reeves can make is a small, across-the-board rise in income tax. It's the one step that will fill that funding gap. Anything else is tinkering, will not achieve the desired financial result and in terms of driving investment away and sending a ruinous international signal, will provoke more harm than good.
