George Osborne will stage a tax grab on London's booming top-end property market
The chancellor will introduce a new 7 per cent stamp duty rate on sales of property above £2m
The highest stamp duty rate is 5 per cent on sales above £1m
The plan could raise hundreds of millions of pounds a year
George Osborne will on Wednesday stage a tax grab on London’s booming top-end property market, in a Budget which will offer significant cuts in the taxes paid by business and low and middle income families.
Mr Osborne will confirm he is cutting the top rate of income tax from 50p to 45p, but the wealthy will be hit by a punitive array of higher levies on the purchase of expensive homes and a crackdown on avoidance schemes.
The chancellor will introduce a new 7 per cent stamp duty rate on sales of property above £2m, according to officials involved in the Budget, as new figures revealed that sales of homes worth more than £5m in the capital soared by 98 per cent in the first 11 weeks of the year to £723m.
The highest stamp duty rate is 5 per cent on sales above £1m. Combined with a crackdown on stamp duty avoidance the plan could raise hundreds of millions of pounds a year, going some way towards fulfilling a Liberal Democrat push for a “mansion tax”.
Some of the revenue raised will be directed towards help for business; government insiders say they expect Mr Osborne to reduce the main rate of corporation tax rate by 2p to 24p in April, double the cut previously announced. The Treasury refused to comment.
The chancellor wants Britain to have the most competitive corporate tax regime of any major country and he will also send out what he believes is a strong signal to overseas investors by axeing the 50p top rate of income tax, introduced in 2009 as a “temporary” measure.
Labour will focus its Budget attacks on the scrapping of the 50p rate, which Ed Miliband believes is indicative that the coalition has the wrong priorities and is more interested in helping the rich than supporting struggling working families.
But Mr Osborne will insist that the overall effect of the Budget will be to divert money from the wealthy to “low and middle earners”, notably through an increase in the income tax threshold to about £9,000, saving them at least £125 a year.
Nick Clegg, Lib Dem leader, will claim the package is a “Robin Hood Budget” and coalition official stress that the rise in the tax threshold is by far the biggest single item in the chancellor’s red book. The coalition aims to put in place a £10,000 threshold before the general election.
While the Budget is expected to be fiscally neutral and to have little overall impact on the economic outlook, Treasury sources boasted it was the first time in 10 years that a British chancellor had cut taxes and spending simultaneously.Mr Osborne will delight Tories by announcing some additional cuts – possibly to welfare.
In other measures designed to appeal to the Tories, Mr Osborne will focus on supply-side measures he hopes will ultimately boost the economy, including relaxing Sunday trading laws around the Olympics and restricting public sector pay rises in poorer parts of Britain to reduce differentials with the private sector.
But there is no sign that the independent OBR, which has looked at Budget measures and locked down its forecast on March 7, has been impressed enough to increase its estimate of the potential for the economy to grow.
Additional reporting by Ed Hammond