Mansion Tax 2.0

The Labour leader, Ed Miliband, has recently announced that a future Labour government would introduce a Mansion tax on homes worth £2m plus to fund the re-introduction of the 10p tax band (that was scrapped by the previous Labour government). Where have we heard this before? The policy is the brainchild of the Liberal Democrats and usually rears its ugly head whenever our politicians are strapped for cash (which is always).

I thought I would review the pros and cons of the proposal.

Pros

• It is better to tax assets which are not mobile (such as property) as opposed to income.
• Cuts and spending reductions in the welfare budget, (particularly housing benefit) justifies a Mansion tax on high value property, in the interests of fairness.

Cons

• The proposal would affect homes with a value of £2m plus. How would a valuation take place? Would it simply affect homes falling in the higher council tax bands? Any valuation could prove highly intrusive and controversial.
• It would affect people who are asset rich (and who have seen the value of their homes rise considerably) but cash poor.
• The coalition government have already introduced a 7% rate of SDLT for £2m plus homes (and a 15% rate if a house is purchased through a company). How much additional revenue would a Mansion tax raise?
• It could affect a lucrative central London market for residential property. Much of the growth in the residential property market has come from wealthy (mostly foreign) investors looking for a safe haven for their cash.

It would appear that the cons far outweigh the pros of this proposal. In times of austerity, it looks and sounds good for politicians to play to the gallery. It should be remembered that the above depends on Labour winning the next election. That is a matter for another post and, indeed, another blog altogether!

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