Rachel Reeves is set to introduce a council tax surcharge on expensive homes in a move that will disproportionately impact London and the South East, according to reports.
The Chancellor is currently finalizing plans to plug a £25bn black hole in the public finances, and last week ruled out a major rise to income taxes.
The new so-called ‘mansion tax’ charge will see the Treasury use the existing council tax system to revalue 2.4m of the most valuable properties across bands F, G and H over the next few years – representing one in 10 English homes.
A new, separate surcharge on top of existing council tax bills will then be applied to 300,000 of the most valuable properties across the top three bands, according to The Telegraph.
Over two million homes are in the scope of the new charge, with a share of the 1.3m middle class families living in band F properties across England set to be hit alongside prime properties in bands G and H.
This will disproportionately affect London, where one in ten homes are over £1m.
It is unclear exactly how much the new levy will cost, with details to be ironed out in the Autumn Budget on November 26.
Sir Mel Stride, the shadow chancellor, has accused Labour of engaging in “a class war against middle England”.
He said: “If Starmer and Reeves decide to introduce a new tax raid on family homes, they will be punishing aspiration and hitting hard-working people.
“Under Labour, nothing is safe – not your job, your home, your savings, or your pension,” according to the Telegraph.
Other taxes under the microscope include a levy on landlord’s income, a gambling tax increase and an exit charge on high net worths leaving the UK.
Housing market under pressure
Reeves’ move is likely to add more pressure to the higher end of the UK’s housing market, which has suffered from a glut of supply and a shortfall in demand.
The issue is particularly strong in the South East: The average price of a flat in London, for example, fell by 2.6 per cent year on year to £445,000, according to the ONS.
Overall house prices in the capital dropped 0.3 per cent year on year, meaning the average price of a property is £566,000.
However, a surcharge on council tax bands, which haven’t been revalued since 1991, is a much lighter option than the previously-trailed capital gains tax for primary residences in the UK.
Changes to the levy have been on the table since 2012, with reforms backed by former Chancellor George Osbourne, although the idea was later blocked by David Cameron.
Reeves has said that higher taxes on the wealthy will be “part of the story” in her Budget on November 26, as she looks to fill an estimated £20bn gap in the Treasury’s finances.
City AM has reached out to The Treasury for comment.