The government’s approach to property taxation in Wednesday’s Budget has been criticised by the HomeOwners Alliance, which said months of open speculation had already dented confidence across the housing market.
Paula Higgins (main picture, inset), Chief Executive of the organisation, says that the drawn-out Budget process had “drained confidence from the housing market, paralysing activity and leaving homeowners anxious”.
She adds: “The housing market thrives on confidence and it’s clear to us that confidence has been the silent casualty.”
With Chancellor Rachel Reeves considering changes to inheritance tax, Higgins warns that restricting gifting would risk cutting off vital support for first-time buyers.
PULLING THE LADDER UP
She says: “For millions, the Bank of Mum and Dad is the step up to homeownership. Restricting gifting won’t level the playing field – it will pull the ladder up and lock more young people out of owning a home.
“Our recent research shows 54% of homeowners with adult children have or expect to help them buy; half wish they could do more; and one in four already feels guilty they can’t. This proposal will make this situation worse.”
Proposals for a so-called mansion tax, levied at 1% on property value above £2 million, must come with a long lead-in period, Higgins says, warning that many households in London and the South East would be disproportionately affected.
“Homes are people’s security, often their pension,” she says. “Many people have prioritised owning a home over all else and are asset-rich and income-poor; they would struggle to afford a sudden new annual charge.”
SITTING DUCKS
She adds that potential council tax increases for bands F to H risked leaving households feeling like “sitting ducks”.
“Homeowners in those bands are already paying significant amounts, and any further tax hikes risk punishing people whose incomes haven’t kept pace with property values,” she says.
A central concern, Higgins argues, is that any new property taxation risks distorting the system unless it begins with a nationwide revaluation of homes.
MARKET DISTORTIONS
“Council tax bands are still based on 1991 values,” she says. “Trying to bolt new charges onto a 34-year-old valuation system risks huge distortions – punishing some households purely because their area has risen in value or they have invested in their home, while others with equally valuable homes escape.
“If the government wants fairness, it must first face up to the need to revalue the vast majority of the housing stock.”
STAMP DUTY REFORM
Higgins welcomes the intention to replace stamp duty but says the policy must be handled with far greater care than in previous years.
“We’ve campaigned scrapping stamp duty for over a decade because it’s a tax on aspiration and movement,” she says.
“But any replacement must be consulted on properly, with winners and losers clearly understood, so people can plan their finances. This toxic cycle of SDLT fiddling, with tweaks, holidays, exemptions etc with all the unintended consequences, needs to stop.”
She says the Chancellor must prioritise “stability, predictability and fairness”, including a transparent consultation on all property tax changes and a long-term framework that households can plan around.
“The country needs a housing tax strategy – not more policy made on the hoof,” she adds.
