Labour Party announces mansion tax plan
The annual levy would apply to residential property valued above GBP2 million. Estimates for the number of such homes in the UK range between 58,500 and 110,000 although most estimates are at the top-end of the range. Many do not fall under the traditional image of a 'mansion'; according to estate agent Knight Frank, 22 per cent of these properties are flats and 11 per cent are semi-detached houses. More than 80 per cent are in London and south-east England.
Labour Shadow Chancellor Ed Balls has reassured voters that the tax would be 'fair, sensible and proportionate', with owners of the most valuable homes paying more than those just above the threshold. Also, he said the GBP2 million threshold would be increased in line with the market, so owners who are not immediately affected would not be dragged in as property values rise. Some question whether this assurance can be relied upon based on past experience related to the inheritance tax nil-rate band.
James Hender, head of private wealth at Saffery Champness, also noted that the current government lowered the threshold for the annual tax on enveloped dwellings (ATED) from GBP2 million to GBP500,000 after only one year of operation – a precedent that future governments could follow. 'This could mean that in the very near future those being taxed might be those owning GBP1 million or GBP500,000 properties – not just those with GBP2 million properties', he said.
Balls did not state what the tax rates would be, but he said the charge would raise GBP1.2 billion a year. That implies an average annual levy of at least GBP11,000 per affected property, based on the upper estimates of the numbers of properties caught. Using a lower estimate of 97,000 would indicate a GBP17,000 average charge, said Hender.
A key issue is how HM Revenue & Customs (HMRC) would decide whether a property that has not been sold or valued for many years is worth more than the threshold amount. If it followed the current government's approach to the ATED regime, owners would be expected to value their homes every five years. Those who choose not to do so, and were subsequently ruled by HMRC to be caught by the tax, may have to pay heavy penalties, said George Bull TEP of tax advisors Baker Tilly. Under these circumstances, about 250,000 people may have to pay surveyors to value their property for the Labour mansion tax, according to an estimate by Knight Frank.
The Liberal Democrats have already committed to a similar policy, but say it would be implemented through a 'banded high value property levy' – probably meaning an extra council tax band. The Conservative party remains against it.
- Labour leader Ed Miliband has also confirmed that a Labour government would reintroduce the 50p tax rate.
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