Owners of homes worth more than £2bn would be hit with a new levy based on higher council tax bands, under a revised "mansion tax" plan proposed by the Liberal Democrats.
Danny Alexander, Treasury chief secretary, said a high value property tax based on the council tax system could be introduced quickly. He claimed that the tax would "release a wee bit of steam" from the top end of the housing market in London.
He said the idea had been worked through by the Treasury and would bring London, where most expensive homes are located, into line with property taxes in New York, Paris and Frankfurt.
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>The idea of introducing new tax bands for high end properties has been viewed favourably by chancellor George Osborne in the past, but it has been blocked by David Cameron.Mr Cameron opposes any form of "mansion tax" and believes a reformed council tax system would require a wholesale property revaluation.
Labour has said it supports the idea of a "mansion tax", suggesting the idea could be implemented by a Lib-Lab coalition.
Mr Alexander said his idea of targeting expensive homes would not need a general revaluation but said he would not set out plans for new bands or projected revenue until closer to the election.
Previously the Lib Dem "mansion tax" was based on the idea of a 1 per cent charge on every pound of a property's value above a £2m threshold: the policy was intended to raise about £2bn a year.
But Mr Alexander feared that such a plan would trigger a wave of appeals against property valuations.
Under his new model, properties worth more than £2m would be put into broad bands; he gave the example of an £8m home falling into a band ranging from £5m to £10m. He hopes that broader price bands will lead to fewer appeals.
Currently the top council tax band H covers all homes worth more than £320,000 in 1993; Mr Alexander said that meant that homes worth £700,000 today would be charged at the same rate as a home worth £7m.
The Lib Dem proposal would apply a new levy on homes worth more than £2m in today's values, charged according to a series of new bands.
These homeowners would still pay the Band H council tax - as today - but would face a new levy, whose rate has yet to be determined. The levy would be collected by local councils but - unlike council tax - would be returned to the Treasury.
However help would be available to pay the levy, as with council tax benefit, for those living in expensive homes but without the means to pay the charge. That would particularly help the elderly.
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