Personal Account

Don’t be distracted by whispers of a new land levy or council tax revaluation – a capital gains increase and even a wealth tax are more likely

Another week, another round of speculation about the possible introduction of a new tax to help the state meet the bulging coronavirus bill.

The latest spot of kite flying from Treasury mandarins takes the form of an entirely new property levy. Apparently being considered by Rishi Sunak ahead of the crucial March 3 Budget, this would replace both council tax – still, incredibly, pegged to 1991 housing values – and stamp duty, currently subject to a “holiday” on properties up to £500,000, but due to expire on

March 31. has long been critical of stamp duty and this month launched a campaign calling for the holiday to be made permanent.

But as George Bull, a partner at accountancy firm RSM, points out, the Government is not exactly blessed with legislative time. A land tax would be highly complex, controversial and face serious opposition from the Conservative backbenches. As a new tax, it would have to be introduced through an Act of Parliament, passing through both Houses and under intense scrutiny for months. Practical problems aside, how much mental “bandwidth” does the

Cabinet have to force through something so damaging to homeowning, retired people – in other words their core voters? My guess is not a whole lot.

A revaluation of council tax bands – though logical – would be similarly difficult. Homeowners would presumably be able to challenge what band they had been placed in. Millions, particularly in the South East, would be asked to pay much more. Cue mass complaints, council computers crashing, protests outside town halls and furious letter-writing to MPs. So why are insiders briefing journalists with plans for a new tax, or changes to one, so likely to be angrily resisted by millions? Perhaps politicians are practising a magician’s sleight of hand, making us look one way while the real action is elsewhere.

Firstly, we know Mr Sunak is looking closely at capital gains tax after commissioning the Office of Tax Simplification to investigate whether CGT rules “distort behaviour or do not meet their policy intent”. The OTS concluded CGT rates set lower than income tax encouraged individuals and businesses to reclassify income as capital gains.

Mr Bull reckons the Chancellor could announce plans to hike CGT and slash the £12,300 annual allowance, with the change coming in as soon as the new tax year, April 6. Only around 275,000 people a year pay CGT, so expanding this slightly or raising rates could be sold as asking “the rich” to pay a bit more.

Secondly, we have the spectre of a wealth tax. The Wealth Tax Commission proposed a “one-off” 5pc levy that would raise £80bn if applied to individuals with assets, net of mortgages, of £ 2m and more, or £ 260bn if the threshold were lowered to £500,000.

Plumping for a £1m bar would allow the Government to position it as a “millionaires’ tax” justified by the continued economic destruction wrought by the pandemic. Much depends on the speed of the rollout, vaccine effectiveness and whether any semblance of normality looks likely by March. If we are in for yet more months of lockdown, Boris Johnson will be forced to fund it somehow.

A land tax would be highly complex and controversial and would face serious opposition