Chancellor Rachel Reeves is contemplating a new tax on the sale of properties value over £500,000 as a part of wider stamp duty and council tax modifications.
Senior ministers, who’ve been briefed on proposals, have requested officers to look into how a new “proportional” property tax could possibly be applied and mannequin its influence, the Guardian has reported.
It mentioned that officers will begin with analyzing a possible nationwide property tax, which might look to switch stamp duty on owner-occupied residence.
In addition, they’ll take a look at whether or not a neighborhood property tax might then substitute council tax within the medium time period, with the goal of serving to native authority funds.
While a nationwide tax could possibly be applied throughout this parliament, it’s understood that an full overhaul of the present council tax construction might take an extended time frame.
The new nationwide tax could be paid by owner-occupiers on properties value greater than £500,000 when it goes to sale.
The whole sum would fluctuate and be decided by the worth of the property primarily based on the speed set by the central authorities. The authorities would acquire the proceeds through HM Revenue and Customs.
However, it has been mentioned the new tax wouldn’t substitute stamp duty on second properties.
A variety of choices are being proposed for its implementation however it’s prone to be a phased in strategy.
The newest figures present, that stamp duty receipts for April to June this yr totalled £4.6bn. In June alone, patrons paid £1.1bn, a 15% enhance from the £918m paid in May.
In whole, homebuyers paid £6.6bn in Stamp Duty all through the primary six months of the yr, a 21% enhance on the £5.4bn paid in the identical interval final yr.
Since April this yr, patrons needed to begin paying Stamp Duty on properties bought over £125,000 – after the nil price threshold dropped from £250,000 on 1 April.
The Guardian reported that the new proposals would have an effect on round a fifth of property gross sales, in contrast with about 60% with present ranges of stamp duty.
According to Nationwide’s newest home worth index, the typical home worth within the UK in July was £272,664.
The Guardian additionally mentioned Treasury officers have been partly drawing on the findings of a report from Onward, which was printed in August final yr.
The Onward report proposed a twin strategy of a nationwide and native “proportional property tax” on properties, primarily based on its worth.
The report was written by Tim Leunig, who labored as a authorities adviser for greater than a decade.
Leunig mentioned: “These proposals would make it simpler and cheaper to maneuver home, for a greater job, or to be close to household, in addition to being fairer. It shouldn’t be the case {that a} terrace home in Burnley pays greater than a mansion in Kensington – and it wouldn’t be below these proposals.”
Leunig additionally proposed a new native annual property levy to switch council tax.
This proposal means residents would not pay the tax however as a substitute house owners of a property value as much as £500,000 would pat various charges of tax depending on the worth of their residence.
They would pay a minimal of £800 a yr and the funds this generates would go on to native councils.
A spokesperson for the Treasury mentioned: “As set out within the plan for change, the easiest way to strengthen public funds is by rising the economic system — which is our focus. Changes to tax and spend coverage aren’t the one methods of doing this, as seen with our planning reforms, that are anticipated to develop the economic system by £6.8bn and reduce borrowing by £3.4bn.
“We are dedicated to holding taxes for working folks as little as potential, which is why ultimately autumn’s price range, we protected working folks’s payslips and saved our promise to not elevate the fundamental, greater or further charges of earnings tax, worker nationwide insurance coverage or VAT.”
