• The Chancellor is reportedly planning an annual council tax surcharge on homes valued above £2m
• Almost 600,000 homes in London are in the top three council tax bands – and that’s based on sale values that are more than 40 years out of date.
• Experts say London and the South East are the areas most at risk of a mansion tax
The London homes most at risk from a rumoured “mansion tax” can be revealed.
She is believed to have watered down her initial plan to impose the levy – estimated at an average of £4,500 – on homes worth £1.5m more.
Instead, she is expected to only target those valued in excess of £2m.
The extra amount would be added to council tax bills – which suggests it could become an annual surcharge.
Working out which homes would pay the levy would reportedly be done by revaluing all the homes in the country that are currently in the three highest council tax bands – F, G and H.
But research by The Standard has established that almost 600,000 homes are already in the three highest council tax bands – placing many residents at risk of becoming liable for the new tax.
Exact details remain unclear but it is thought the new tax could be imposed from 2028.
However revaluing even just the homes in the three top council tax bands would be a mammoth task.
Imposing a surcharge on those already classed as band F, G and H properties would be much simpler.
However these bands date from 1992 and fail to take account of the huge changes in the London property market over the last four decades.
For example, only 29 homes in Waltham Forest and 50 in Hackney are currently in the highest band – which makes a mockery of the soaring prices in both boroughs, particularly in desirable areas such as London Fields and Walthamstow.
The seven London boroughs with the greatest amount of Band H homes are: Westminster (16,772), Kensington & Chelsea (15,176), Camden (4,730), Barnet (4,339), Richmond (3,606), Hammersmith and Fulham (2,914) and Wandsworth (3,007).
But Bromley has more than 30,000 homes in Bands F and G, placing many of its residents at risk of a mansion tax, while there are around 20,000 in Croydon and 15,000 in Enfield also in these categories.
This is what we know so far about the proposed mansion tax.
When is the mansion tax due to start?
According to reports, it may not be introduced until 2028. There is the suggestion that residents can defer paying it until they move home – or until they die.
What do the experts think?
TV presenter Kirtie Allsopp, of Location, Location, Location fame, said there was a need to reform the council tax system.
But she told Times Radio: “We all know that council tax is unfair. It doesn’t work. It needs to be redone. I have no objection to re-examining council tax. But I think the problem about this proposal is it’s going to cost a lot of money to revalue those properties.”
Jack Fletcher-Price, equity analyst at Morningstar, said a mansion tax would disproportionally hit London and the South East.
“The changes to council tax bands is probably overdue, but it will further undermine trust in this Government given they promised not to do this in the run up to the election,” he said.
When was council tax introduced?
Council tax was introduced into England, Scotland and Wales in April 1993, replacing the community charge or “poll tax”.
How many properties are liable for council tax?
25.1 million dwellings are liable for council tax in England. Of these, 15.9m are liable for the full rate while 8.8m qualify for a discount – of which 8.5m receive the single person’s discount.
There were 268,000 dwellings recorded as second homes for the purposes of council tax. Most councils charge double rate council tax for second homes.
How is the council tax worked out?
Councils set a “benchmark” band D rate. Each of the other seven bands is then a fraction or multiple of this amount – from 6/9 for Band A to 18/9 for Band H.
How do homes end up in a particular band?
Banding in England and Scotland is based on sale values as of April 1991. Wales is slightly less out date and uses sale values on 1 April 2003. The Welsh government plans a further revaluation, to take effect from 1 April 2028.
Valuations are carried out by the Valuation Office Agency in England. Councils do not participate in this process and cannot compel the revaluation of single or multiple properties.
What’s the problem with council tax and why is it called a regressive tax?
According to the House of Commons library, even after taking account of council tax benefits, the poorest fifth pay a greater proportion of their gross income on council tax than the richest fifth.
Last year the London mayor Sir Sadiq Khan said: “Council tax is a regressive tax as the poorest Londoners pay around six times more in council tax than the highest earners as a proportion of income.”