Reeves plans Autumn Budget tax attack on luxury homes

Rachel Reeves is strongly considering changes to council tax payments as a way for owners of more expensive homes to pay more, according to people familiar with the matter.

The move would replace a direct sales tax on expensive homes, which experts say would only weaken the market as fewer people move.

Although no decision has been taken, Reeves said that higher taxes on the rich will be “part of the story” in his Budget on November 26, as he seeks to fill an estimated £20 billion gap in the Treasury’s finances.

People close to the preparations said that “administrative simplicity” was key, according to the Financial Times.

Changes to council tax payments would raise the figure by billions of dollars, according to the FT.

Current council tax bands are based on assessments from the 1990s, and the significant growth in house prices since then – particularly in big cities – has led to some owners of multi-million pound properties paying the same rates as those with terraced houses in smaller towns.

Changes to the levy have been under discussion since 2012, with reforms supported by former Chancellor George Osbourne, although the idea was later blocked by David Cameron.

One way to change rates would be to double the rate of council tax on properties in the two highest existing bands, which could raise £4.2 billion, according to the IFS.

“I can see them doing a very expensive council tax on high-value properties – it’s one way of taxing wealth,” Ruth Curtice, head of the Resolution Foundation think tank, told the FT. “By itself, this won’t solve the problem of property taxation, but we already pay council tax and you’re going to ask the rich to pay more.”

Any changes to property taxes would likely have a major impact on London, which has much higher house prices than the rest of the country.

“London is already at risk of becoming an aging city, with young professionals moving out of London due to high house prices and soaring rents,” said Peter Graham, partner and tax lead for real estate and construction at RSM UK.

“Therefore, we could see a slowdown in transactions in London, with sellers delaying moves or making cuts to avoid the impact [a] tax.”

The Treasury Department declined to comment.