New tax for home improvements

MILLIONS of families face a new stealth tax on their home improvements, the Treasury had to admit yesterday. For the first time, all home owners will be liable to pay extra council tax on any extensions and improvements they have made.

The charge, brought in on the orders of Deputy Prime Minister John Prescott, will cover loft conversions, conservatories and extra bathrooms.

It will also hit householders who have built summerhouses, sheds and swimming pools, as well as those who have converted their front gardens into parking spaces. The victims will include families who chose to pour money into their homes rather than face the expense of moving in a slowing housing market.

Many will face council tax bills raised by more than £250. Some are likely to see rises of £400 or more as the improvements push their homes into higher tax bands.

Most improvements can be traced through planning applications and building control permits issued by councils. Those who try to hide them - like homeowners who keep extensions secret by failing to apply for planning permission - will face inspections by officials with full legal powers to enter and inspect their homes.

Around two million people are reckoned to have made improvements over the past year alone that will count towards council tax. Having budgeted carefully to pay for the work, many will have to make dramatic cuts in family spending to meet the extra charge.

The move was condemned by critics last night and labelled a new 'window tax' after the 18th century levy on glazed windows which became one of the most unpopular taxes in history.

Tories said the change in the rules would 'hike council tax bills by stealth' and warned that hard-working families and pensioners who have invested time and effort renovating their homes would be worst hit.

The party's local governemnt spokesman, Caroline Spelman, said: 'This will be a window tax on home improvements and homeowners who have pride in their property. Armies of clipboard inspectors will be descending on every town in England to inspect peoples' homes to justify whacking up their council tax bills.'

The move on home improvements was confirmed by Treasury ministers in a Commons written answer giving details of the council tax revaluation that is now starting to get under way to take account of considerable rises in property prices over the last 14 years.

It will be reflected in council tax bills from April 2007. The revaluation is the first official reassessment of the way houses are banded for council tax since the system was introduced in 1991.

Until now, home improvements have not been taken into account until a house is sold. The Government's Valuation Office Agency then reassesses council tax for the new occupants. Otherwise, improvements have never been assessed, in the words of the Agency, to 'ensure that owners are not dissuaded from improving their property'.

Paymaster General Dawn Primarolo said the revaluation will take into account the number of bathrooms and bedrooms in a home, its floor area, the age of the property, whether it has off-street parking, the number and size of outbuildings or conservatories and even the extent of the garden.

She said: 'It is the intention of the Valuation Office Agency, when assigning dwellings to bands for the forthcoming council tax revaluation, to reflect a number of property attributes, including all those referred to, where a value significance can be established.'

Miss Primarolo also confimed that the army of inspectors who will work for the Agency in the £100m revaluation will have the right to demand entry to homes inspect improvements.

Mr Prescott foreshadowed the tax on home improvements in a consultation paper last autumn. But his officials suggested at the time that only major improvements such as extensions would be affected, and that conservatories and more minor work would not count.