Rachel Reeves is accused of bringing in a ‘tax on aspiration’ (Image: Getty)
Rachel Reeves has been accused of imposing “a tax on working hard” after setting out plans to increase council tax by £2,500 for expensive homes. A Treasury consultation revealed properties could become liable for higher charges if an extension is added.
The Government expects to raise an extra £635million every year from homeowners after imposing a “high-value council tax surcharge”, which will be paid in addition to existing council taxes. Initially, 165,000 properties worth £2million or more will be affected. The Government says this means only one in 100 homes is liable, although Conservatives predicted more properties would be included in the future.
The extra payment is £2,500 for homes worth up to £2.5million, rising to a maximum of £7,500 for the highest-value properties.
Read more: Labour leadership chaos ‘is damaging the economy’
Read more: Things just got worse for Keir Starmer – now he’s stuffed without Reeves
Revaluations of homes worth more than £2million will be carried out every five years, but if a property is renovated or extended, the new value will take effect as soon as it is sold.
Shadow local government minister Gareth Bacon said: “Labour’s new family homes tax is a tax on aspiration, on working hard, saving hard and investing in your family’s future.
“Labour politicians, spurred on by Greens and Liberal Democrats, will no doubt drag more families into the net. And none of the money will fund local services – every penny will go straight to Whitehall bureaucrats.
“Meanwhile, under Labour, council tax is soaring across the board, with the average family in a Band D home facing a cumulative £1,134 increase across this Parliament. Only the Conservatives can be trusted to keep tax on the family home down.”
The Treasury plans include allowing homeowners to apply to defer payments until they sell their property or die, in an apparent admission that the charges will hit some people whose homes have soared in value but who do not have high incomes.
Ministers insisted the changes will end a current unfair system in which luxury mansions pay the same council tax as large family homes.
Dan Tomlinson, Exchequer Secretary to the Treasury, said: “A £10million mansion in Mayfair should not be paying less council tax than an ordinary family home in Darlington or Blackpool.
“This change tackles historic unfairness, so that those with the most valuable properties pay their fair share, helping to rebalance the system and putting money back into communities up and down the country.”
But Sarah Coles, head of personal finance at personal investment providers AJ Bell, said: “Posh properties are set to become piggy banks when the ‘mansion tax’ kicks in.”