Metro - 28 February 2013
By Jo Eccles
There has been a lot of speculation recently about a proposed Mansion Tax on properties priced above £2m. Apparently, there are 70,000 homes worth over £2m in the UK, almost half of which are not main residences, and in many cases are not occupied. It is believed that a Mansion Tax could raise as much as £1.7bn – £2bn.
Britain has the highest property tax of any Organisation for Economic Co-operation and Development (OECD) country, and our property tax is already hitting the top end of the market the most. In 2010, for example, the highest 1.6% of residential property sales brought in £1.2bn, the equivalent of 26% of all stamp duty receipts.
Mansion Tax has been suggested as a cheaper alternative to updating council tax bands, but there is concern that it would discriminate against certain homes owners, particularly asset rich but low-income owners such as the retired and elderly. There are also concerns that wealthy homeowners who own multiple properties priced below £2m would be spared.
I expect that it would lead to disputes amongst homeowners on the cusp of the £2m threshold, and that if implemented, it could result in a number of forced sales at that end of the market. I have already seen a few cases recently resulting from the increased tax on properties held by a company, where the company cannot afford the annual tax and needs a quick sale.
One argument for the proposal is that the baby boomer generation has enjoyed the gains of significant house price rises and should give something back. On the other hand, others believe that it is an unfair double tax as most home owners have already paid income tax on their earnings to acquire the property in the first place.
We will have to wait and see how this plays out. Regardless of which way this goes, uncertainty in any market is not good and this is quite a big factor to have hanging in the balance.