A “mansion tax” will be introduced in the Budget, say Labour MPs after talks with Chancellor Rachel Reeves.
The new levy on expensive homes would hit London and the wider South East hardest.
After her screeching U-turn on plans to break Labour’s flagship manifesto pledge on tax, in order to raise income tax, the Chancellor has been speaking to Labour MPs amid disquiet on the backbenches.
Some 30 backbenchers were invited into No11 to speak to Ms Reeves, over snacks and wine, according to Politico.
The Labour Chancellor is said to have made clear to them that a “mansion tax” would be in the Budget on November 26.
She also reportedly urged them to highlight a chart, to be published in the Budget documents, which would show how the wealthy are being hardest hit by her tax rises expected to be around £20 billion.
Ms Reeves also told Labour MPs, according to the report, that she had been planning to announce her startling U-turn not to break Labour’s manifesto tax promise as a “rabbit out the hat” at the end of her Budget speech but the news had leaked out.
A “mansion tax” could be imposed on homes worth more than £2 million, potentially with a one per cent levy on the value above this level of the properties.
Such a levy would leave owners of properties worth £2.5 million having to pay an extra £5,000 a year in tax, or just over £400 monthly, while a £3 million home would owe HMRC around £10,000 annually, or close to £800 a month.
Just over 60% of homes over £2 million are in London, with just under 20% in the South East, according to analysis by Lucian Cook, director of residential research at agents Savills.
But there are also reports that Ms Reeves may target properties worth over £1.5 million, rather than just over £2 million, which would mean tens of thousands more homes in London being caught by her latest tax grab.
Options she is said to have considered are reported to include by raking in more money for the Treasury from Council Tax bands F, G and H.
Earlier in November, the Chancellor said she was “a progressive” who believed “those with the broadest shoulders should pay the most”.
The capital and wider South East are clearly in Ms Reeves’ sights.
Nearly 500,000 people in these two regions face being dragged into paying the 40% higher rate of income tax if as expected she extends the six-year freeze on thresholds for paying this levy by a further two years to 2029/30.
Other Budget measures could include a more hefty bank levy, restrictions on pension salary sacrifice schemes, a new road levy for electric vehicles, and limits on a salary sacrifice scheme for cyclists to buy bikes.
Ms Reeves is also expected to announce that she is giving London Mayor Sir Sadiq Khan the power to impose a tourist tax in the capital.
Business leaders are warning that the Chancellor risks further undermining the economy with her latest tax raid, after her first Budget, with its £20 billion hike in National Insurance contributions for employers, was widely blamed for hitting growth.
The Left-leaning IPPR think tank, though, is urging Chancellor to “pick the right fights” at the Budget by taxing people with “unfair advantages and profits” before raising money from “working households”.
The think tank, which has been influential in Labour policy-making, said the Chancellor should reform property taxes, raising council tax on the most valuable homes, and close “loopholes” in capital gains tax that “allow income from wealth to be taxed more lightly than earnings from work”.
The IPPR also called for national insurance to be levied on landlords and a reform of gambling taxes, before even considering broader measures such as extending the freeze on income tax thresholds.
Carsten Jung, executive director at IPPR, said the Chancellor should “launch ‘a war on bills’ - a relentless campaign to lower the cost of living, picking fights on behalf of working people”.
He said: “This should start with energy, food and council tax. Together with repairing public services, this Budget can be living proof that the Government is on people’s side.”
