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Labour’s ‘garden tax’ and whether you’ll need to sell your home

17th Jul 2019

Kevin Ross, director at Brown Turner Ross, looks at the recent report commissioned by the Labour Party and the impact their new housing policies could have on the market.

 

Labour’s property tax overhaul would see them replacing Council Tax with a progressive tax that would be payable by the landowner rather than the occupier of the property. 

 

The policy idea is contained in a new report called ‘Land for the Many’ which calls on Labour to make a string of "radical but practical changes in the way land in the UK is used and governed” if it were to win the next election.

 

Labour claims it is targeting housing market reforms, principally to make it more affordable for people to enter the market and to address the situation many leasehold owners find themselves in with high ground rents and even higher prices to buy the freehold.

 

The report which aims to "discourage the use of homes as financial assets, reduce the tax paid by the majority of households, and encourage more efficient use of the housing stock" has been described as a ‘garden tax’. 

 

The annual tax bill would be based on the current value of a property, targeting larger homes with gardens - something which could significantly affect families, widowers and pensioners. 

 

 

This policy has the potential to leave some homes unattractive to buyers because of the large tax bill accompanying it - leaving as many families trapped as the current leasehold system does.

 

There are also concerns in Labour’s plans for anyone who owns a second home, has an empty home for more than two years or owners living outside the UK for tax purposes who would be hot in the pocket by “significantly higher” rates.

 

For the commercial sector, Labour could aim to replace business rates with a land value tax based on the rental value of local commercial land. This could take some of the risk out of the market for investors but there’s no clear indication whether LVT would replace corporation tax or simply add to it.

 

What is clear is that a sensible implementation and a simplifying of the system (rather than adding to it) would be necessary for any of these plans to work in practice and not badly affect the market.