The Financial Times says it has some details of the proposed ‘mansion tax’ widely expected to be announced in today’s Budget.
It will apply to homes worth over £2m – a figure reached after lobbying by London MPs when they were originally told it would kick in at the £1.5m level. The higher level will scoop up some 140,000 homes whereas the lower level would have taken in approaching 300,000.
The £2m policy is expected to raise between £400m and £450m a year, according to the FT – a modest contribution to the fiscal hole said to be facing Reeves estimated at about £30 billion.
The tax will take the form of an annual surcharge on council tax bills. This will be applied on a sliding scale depending on the value of a property above the £2m threshold, but is expected to average about £4,000 a year.
“This policy treats paper wealth as though it’s liquid cash, and the two simply aren’t the same” according to Amy Reynolds, head of sales at Antony Roberts, a London estate agency. “Many owners of £2m homes aren’t high-income households – they’re long-term owners who’ve benefited from inflation, not vast salaries. By taxing them as if they’re cash-rich, the government risks paralysing exactly the part of the market that needs to move.
“For those buying at £2m and above, there’s already a substantial upfront tax in stamp duty; now they’re being asked to shoulder an ongoing levy as well. How many times can the same pound be taxed? At some point, those with the broadest shoulders simply leave – and when they do, it’s the middle classes left behind who end up squeezed the hardest.”
Paula Higgins, chief executive of HomeOwners Alliance – a consumer group championing homeowners and those who aspire to own – says: “If a mansion tax is introduced, in the form of a 1% levy on properties worth at least £2m, with an annual charge of 1% of the amount over that threshold, there must be a long lead-in time. Homes are people’s security, often their pension.
“Many people have prioritised owning a home over all else and are asset-rich and income-poor; they would struggle to afford a sudden new annual charge. A ‘mansion tax’ also hits ordinary family homes in London and the South East far more than the rest of the UK.”
Marc von Grundherr, director of Benham and Reeves, says a mansion tax will fall disproportionately on London homeowners, who already shoulder the largest tax burden in the country.
“The capital’s high value properties mean that any new levy aimed at the top end inevitably targets London first, and it is hard to see how this supports a market that has already endured several years of subdued activity.
“We have seen international investment all but disappear from London in recent years, despite it being a vital component of the capital’s housing ecosystem. If the government wants to attract these buyers back and restore confidence in a sector that underpins so much economic activity, the answer cannot be to layer even more tax on top of an already overloaded segment.
“London needs stability, competitiveness and a clear long term framework that encourages high value buyers rather than discouraging them. Punitive measures aimed at the prime market may appear politically convenient, but the wider impact is felt across the entire housing chain. A strong, functioning prime market supports liquidity at every level and any policy that undermines it risks holding the whole market back.”
Global tax firm Ryan has warned that the government’s consideration of a new mansion tax risks intensifying Britain’s already unparalleled reliance on property-based taxation just as businesses prepare for a £3.6 billion increase in business rates next year.
Over the last decade, according to analysis from Ryan, UK property tax receipts have surged from £74.59 billion in 2014/15 to £99.98 billion in 2023/24, a £25.39 billion annual increase, up 34%.
Alex Probyn, practice leader of property tax at Ryan, states: “The UK already has the highest property tax burden in the developed world as a percentage of GDP. Adding a mansion tax on top of that isn’t reform—it’s an escalation. Businesses are already facing a £3.6 billion rise in business rates next April, and a new levy on high-value homes simply reinforces how dependent the Treasury has become on property to plug fiscal gaps.”
This article is taken from Landlord Today