It comes after reports suggested that Rachel Reeves is considering plans to raise money from a tax on the sale of homes worth more than £500,000 as part of radical new measures to overhaul both stamp duty and council tax.
While no final decision has been made, it is thought this national tax could help build a model for local levies to replace council tax in the medium term.
Heather Powell, a Partner at tax and accountancy specialists Blick Rothenberg, said: “The immediate result of the introduction of a national property tax is likely to be a significant slowing down of the property market, particularly in the South East where the average price of family homes is over £500,000, and a drop in the tax revenues collected by the Government.
Buyers currently pay stamp duty under the existing framework, if they purchase property worth more than £125,000. The threshold is £300,000 for first-time buyers.
The move could also push up house prices for first time buyers, Peter Graham, partner and tax lead for real estate and construction at RSM, said.
He added: “The proposed tax reform would have a significant impact on the London market, given the average property price is well above the £500,000 threshold.
‘Asset-rich, cash-poor’ could also be hit
Housing market experts said the move would also disproportionately hit the so called “asset rich, cash poor”, who are often pensioners that bought their houses decades ago but are living off their pensions.
Such a major change to the tax system is unlikely to be ready until potentially the next parliament, meaning Labour would have to be re-elected to enact it.
At a rate of 0.44 per cent, with a 0.278 per cent supplement on values over £1 million, the levy “would raise the same amount as stamp duty”.
‘Tax-grab would punish families’
“This tax grab would punish families for aspiring to own their own home.”
She has come under pressure from Labour colleagues to impose a ‘wealth tax’, which it could be argued a property tax would be.
“Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8 billion and cut borrowing by £3.4 billion.
“We are committed to keeping taxes for working people as low as possible, which is why at last autumn’s budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee national insurance, or VAT.”
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