By Richard Johnstone | 10 April 2014
Chief Secretary to the Treasury Danny Alexander has proposed the creation of extra council tax bands to implement the Liberal Democrats’ proposed mansion tax.
In a speech in London on tax policy, Alexander said the current system of council tax where the highest band applied to homes with a rateable value of £700,000, was unfair.
The LibDems had previously proposed a mansion tax on homes worth more than £2m. This would be calculated as a percentage of their value and would pay for the further extension of the tax-free personal allowance to around £12,500.
In his speech at Bloomberg’s London offices yesterday, Alexander said that the Treasury had now undertaken work on how to implement the levy on higher value homes.
‘So the new system I, as a Liberal Democrat, am proposing is really simple – a modest additional banded levy on top of council tax for high-value properties.
‘The annual charges, in addition to council tax will be set out in good time ahead of the general election next year,’ Alexander said.
Building on the council tax system would mean that most properties would not require a valuation, he said. The money would be collected by councils but pooled centrally in Whitehall, he said.
‘Crucially this means that this policy could be implemented quickly after the election. And people in homes valued at below £2m would continue to pay just council tax.’
Although there would be a process required to decide property values, he said a banded structure with annual uprating meant ‘people living in typical family homes need have no fear of being sucked into this levy’.
Responding to Alexander’s announcement, the British Property Federation said the clarity was welcome.
Chief executive Liz Peace said: ‘We are delighted that the Lib Dems are taking this much more sensible approach to the Mansion Tax.
‘The council tax system remains in principle a better way of taxing property, if the valuations on which it is based are up-to-date. Adding some additional bands of council tax makes sense as a sticking-plaster measure, but ultimately if fairness is politicians’ goal then only a full revaluation in conjunction with more bands will do this.
‘We would therefore still like to see all parties commit to a full revaluation of council tax by 2021, and make that part of their next general election manifesto commitments.’
