The local property tax could replace council tax within two Parliaments
Chancellor Rachel Reeves is reportedly planning to replace stamp duty with a new “national property tax” on residential homes valued at above £500k.
Officials have been told to study how a “proportional” property tax could work, The Guardian reported on Monday, adding the local property tax could replace council tax within two Parliaments.
“Values of different properties have changed very differently since council tax was introduced – on average increasing more than twice as much in London as in the North East, for example – yet the tax has not changed to reflect that,” explained the Institute of Fiscal Studies in a 2020 paper on reform to council tax.
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A group called Fairer Share proposes scrapping council tax entirely, along with other property taxes, and switching it for a 0.48 per cent flat tax on the current value of your property.
tephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, warned that a new “national property tax” will make property prices go up.
He said: “The property market was one area of the UK economy the government hadn’t yet broken, so Labour is now working on plans to crash it.
“Financially, unless the property tax is ridiculously high, this will raise less money than stamp duty, as fewer homes will be affected.
“Initially, sellers will just build this into asking prices, sending prices up. The biggest fear will be thresholds being frozen and it won’t be long before the majority of houses south of Manchester will be included in this tax.
“Those who paid stamp duty to buy their homes, who will then pay a further tax when selling it to downsize, will be rightly frustrated. This potential fiscal overhaul smacks of desperation and a party clutching at straws.”
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, also said: “The taxation system around property and inheritance certainly needs careful consideration for change; however, this does have the smell of desperation to make a ‘quick buck’ for the government.
“Pushing stamp duty higher has meant less tax has been collected, a classic ‘more is less’ fiasco.
“By simply reducing stamp duty levels, the government will collect more revenue, as well as boost employment in many related sectors. This proposal just screams of desperation.”
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