HOMEOWNERS should be aware of the five ways Rachel Reeves could come after your home in next week’s Budget.
The Chancellor is rumoured to be targeting property owners as one of the ways to plug a hole in the public finances.
The Chancellor wants to avoid back-pedalling on Labour’s manifesto promise not to raise taxes on working people.
She has already dropped plans to increase income tax to avoid breaching this pledge.
But Reeves still needs to find £30billion to plug a huge hole in the public finances.
One of the ways to do this could be to go after property owners.
Among the measures still on the table include a £600million surcharge on high-value homes and a new property levey.
While speculation is rife, there is no way to know for sure which measures the Chancellor will announce in the Budget on November 26.
It’s also unclear when any measures that are announced will come into force.
Here we explain some of the changes that could hit homeowners and how they could affect you.
Council Tax surcharge
The Chancellor is said to be preparing a £600million surcharge on high-value homes as part of her Budget, according to reports first published in Telegraph.
It is understood the Government will be revaluing 2.4million homes across council tax bands F, G and H.
A new, separate surcharge on top of existing council tax bills will then be applied to 300,000 of the most valuable properties across the top three bands.
It means middle class families in band F could be paying hundreds of pounds more, on top of council tax bills which already average £3,293.
Meanwhile homeowners living in the most valuable properties could be paying thousands of pounds more per year.
New property levy
Another rumour floated suggests Reeves could potentially scrap council tax altogether.
It was reported she could replace it with a new yearly charge based on house prices.
The Chancellor was reportedly understood to be considering an alternative measure that would impose an annual 1% levy on the portion of a property’s value surpassing £2million.
It would mean owners of £3million homes would face a tax bill of £10,000.
Figures crunched by Knight Frank for the outlet said just over 150,000 properties in England and Wales would be hit by the proposals if they were announced.
It could be bad news for downsizers because it may put buyers off.
It would also hit asset‑rich, cash‑poor homeowners who have benefited from big house price rises.
However, if such a measure were introduced, it’s understood the money raised could be used to fund help for first‑time buyers.
Capital Gains Tax
Reports also suggest the Government could remove Capital Gains Tax (CGT) relief for pricier main homes.
It would mean sales of main residences worth £1.5million or more would face CGT.
As things stand, no one needs to pay CGT when they sell their primary residence.
The current CGT rates are 24% for higher‑rate taxpayers and 18% for basic‑rate taxpayers.
Everyone can still deduct a £3,000 annual CGT allowance from any gains.
If the rules were changed then once a home sells for more than £1.5million, you would lose the tax exemption and all of the profit is taxed.
For example, if you bought for £500,000 and sell for £1.6million, you would be landed with a tax bill of £262,363.80 just to sell your property.
And if you are a higher‑rate taxpayer earning more than £50,271, you would face a £263,280 bill.
Inheritance Tax
Inheritance Tax is a 40% tax on your estate when you die.
Currently, your estate includes your house, cash savings and any other possessions. Your pension is exempt.
You can pass on up to £325,000 in assets before any IHT is due, or up to £500,000 if you pass your property to your children or grandchildren.
There is also no IHT due between spouses, and you can leave them your IHT exemption when you die, so they could pass on up to £1million.
Scrapping or curbing this relief would drag 30,000 additional families into the inheritance tax net each year, and raise around £2billion annually for the Exchequer, according to The Telegraph.
What is the Budget?
THE Budget is big news and where you’ll often hear announcements about taxes. But what exactly is it?
The Budget is when the Government outlines its plans for the economy including taxation and spending.
The Chancellor of the Exchequer delivers a speech in the House of Commons and announces plans for things like tax hikes, cuts and changes to Universal Credit and the minimum wage.
At the same time, the Office for Budget Responsibility (OBR) publishes an independent analysis of the UK economy.
Usually, the Budget is a once-a-year event and usually takes place in the Autumn, with a smaller update known as the Spring Statement.
But there have been exceptions in recent years when there have been more updates, or the announcements have taken place at different times, for example during the pandemic or when there is a General Election.
On the day of the Budget, usually a Wednesday, the Chancellor is photographed outside No 11 Downing Street with the red box.
She then heads to the House of Commons to deliver her speech, at around 12.30 following Prime Minister’s Questions (PMQs).
Changes announced in the Budget are sometimes implemented the same day, while others may not have a set date.
For example, a change to tobacco duty usually happens on the same day, pushing up the price of cigarettes.
Some tax changes are set to come in at the start of a new tax year, which is April 6.
Other changes may need to pass through Parliament before coming into law.
