A new range of property taxes on expensive homes is set to be introduced as the economy recovers, allowing the government to scrap the 50p income tax rate as promised, the Deputy Prime Minister says.
Nick Clegg said the new tax regime would come in once people on lower-middle incomes were “breathing more easily”.
However, Mr Clegg indicated that the Coalition Government would not honour the Liberal Democrats’ manifesto promise of a 1 per cent “mansion tax” on £2m properties.
“It could be a range of things: the way the council tax system is structured; the way stamp duty is structured,” he told the Financial Times newspaper.
The Lib Dems have long advocated a reform of the council tax system, with Mr Clegg adding today: “A liberal tax system rewards work and enterprise and captures pollution and unearned wealth”.
He said the warning to wealthy homeowners had gone largely unnoticed in last week’s Budget.
Chancellor George Osborne said in his Budget announcement: “As well as reviewing revenues from the 50p tax rate, we will also be redoubling our efforts to find ways of ensuring that owners of high-value property cannot avoid paying their fair share”.
A senior Lib Dem source told Channel 4 News today that while the Coalition partners have reached a “broad agreement” on the principles of a tax on expensive property, the Government was “a long way off from making a policy”.
The Lib Dems’ top priority in the tax arena remains the £10,000 income tax threshold, a key pledge in the Lib Dems’ manifesto, he said.
And the Government had yet to determine the success of the 50p income tax rate.
“They need to see how much revenue it is bringing in (before scrapping it), the numbers haven’t been done yet,” he said.
Yesterday, the Business Secretary Vince Cable indicated that a property tax could be the price of Lib Dem support for Mr Osborne’s review of the 50p tax rate – which is popular with voters.
Mr Cable said: “Certainly what I and my Liberal Democrat colleagues will want to see is a very strong commitment to fairness in taxation – and that means lifting low earners out of tax, which is what we have done in this Budget – but also making sure that people who are very wealthy and very privileged do pay their share.”
“There is a very strong argument that you need to have a proper base for taxing property. I’m sure that’s one of the things we’re going to have to look at as we change away from these very high marginal rates”, he added in an interview with BBC Radio 5 Live.
Conservative MPs attacked the idea of a mansion tax when Mr Cable first proposed it before the General Election – the original plan was to impose a 1 per cent tax on homes worth £1m.
Mr Cable, however, has maintained that the introduction of a mansion tax would help cover the cost of raising the income tax threshold to £10,000 – a move which would relieve 3.6m earners from the burden of income tax.
The Coalition has reached a compromise over income tax, raising the personal allowance by £1,000 to £7,475, lifting 880,000 people out of income tax. Mr Osborne said that this figure would rise to £8,105 in April 2012.
The Lib Dems however remain adamant that the threshold will go up every year until it reaches £10,000 by 2015.