A proposed mansion tax by Labour and the Liberal Democrats could potentially deter wealthy investors in various property hotpots in the UK.
They will be taxed per annum based on 1% the value of their property, meaning someone with a property worth between £2m and £3m will pay £3,000 a year, which is between 0.1% and 0.15% of its value. This is better than the Lib Dem’s original proposal in 2010 for a 1% levy on the value of a property above £2m, someone with a £3m property would have been paying £10,000.
Savills recent report warns the government that a fall in international purchases could see £1bn losses in tax revenue from stamp duty, inheritance tax and capital gains tax as a result of this levy. IF you are the leaseholder on a block of flats that is worth in excess of £2m, you could be at risk of this levy applying to you!
This tax will affect asset-rich cash-poor persons the worse. There should be safeguards for people on low or middle incomes who bought properties decades ago and have seen their market value rocket, for example, the house that the family have lived in for decades.
Analysis by head of statistics Anthony Reuben
‘Someone with a property worth between £2m and £3m will pay £3,000 a year, which is between 0.1% and 0.15% of its value.
Under the Liberal Democrats’ original proposals for a 1% levy on the value of a property above £2m, someone with a £3m property would have been paying £10,000.
They would be quite relieved by today’s suggestions, but someone with a property worth just over £2m would not have expected to be paying very much at all.
If Labour gets £3,000 from 100,000 homes it will raise £300m, which is well short of the £1.2bn it aims to raise, so clearly there will have to be considerably larger amounts raised from properties in higher bands and from foreign owners with a second home in Britain.
He said “asset-rich, cash poor” homeowners who do not earn enough to pay income tax at 40% would be able to defer payment of the mansion tax until “the property changes hands”.
Mr Balls said it was “simply untrue” that homes worth much less than £2m right now would end up paying the tax in future as a result of what is known as fiscal drag.
Linking the threshold at which people start paying the tax to price inflation in the £2m plus bracket rather than average inflation, he added, meant Labour were able to “guarantee that more modest properties are not brought into the scope of the tax”.’
