Rachel Reeves has introduced a mansion tax on houses price greater than £2 million.
The “high value council tax surcharge” will apply in England from 2028 and can elevate £400m a yr for the federal government, the chancellor mentioned in Wednesday’s funds.
Householders must pay the annual cost on high of their council tax invoice.
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The transfer was extensively rumoured earlier than the funds, however what’s notable is one other proposal anticipated to be introduced was not.
Ms Reeves was anticipated to introduce a re-evaluation of houses within the three highest council tax tiers (F, G and H), with a surcharge on them.
She didn’t announce this, however as an alternative mentioned there shall be 4 bands for the brand new mansion tax, with values primarily based on 2026 costs.
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‘Mansion tax’ introduced
The bottom band, for properties price between £2m and £2.5m, pays £2,500.
The best band, for houses price £5m or extra, pays £7,500.
Ms Reeves and the Workplace for Price range Accountability (OBR) didn’t reveal the 2 center bands and costs.
However she mentioned the surcharge could be uprated yearly by the Shopper Value Index (CPI) inflation.
The additional income will go straight to central authorities, to not native councils, as is the case for normal council tax.
Ms Reeves mentioned the cost would apply to fewer than 1% of all properties, and would assist “deal with a long-standing source of wealth inequality”.
There shall be a session on help for owners and a deferral scheme for these unable to pay instantly, taking into consideration houses purchased a long time in the past which have soared in worth.
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The OBR mentioned it was extremely unsure concerning the £400m it predicted the tax would elevate annually, and would regulate the forecast, if wanted, after the session.
Paul Johnson, former director of the Institute for Fiscal Research, mentioned the bands would create “big spikes at specific valuations”.
Rob Hillock, head of non-public monetary planning at monetary providers consultancy Broadstone, mentioned: “The chancellor’s introduction of a ‘mansion tax’ on houses valued above £2m will likely prompt many homeowners to get an up-to-date valuation of their property wealth.
“It has the potential to create market distortions as owners look to cut back the worth of their residence to keep away from further tax or immediate some to downsize to smaller, cheaper houses.
“The OBR notes in its comments that the reform could see price bunching below each of the four new price bands as homeowners look to minimise their tax liability.”
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Mark Campbell, head of wealth at monetary consultancy Isio, mentioned the mansion tax makes a “flawed assumption” that these dwelling in houses price greater than £2m have the liquid wealth or earnings to pay the tax.
He mentioned it dangers penalising people who find themselves asset-rich and cash-poor, particularly in London and the southeast.
He additionally warned the mansion tax dangers sending a message that the UK is a much less enticing place for buyers, wealth creators and entrepreneurs.
