The impact of the mansion tax
12 November 2014
With Ed Balls suggesting that owners of houses between £2 and £3m would pay around £250 per month in a 'mansion tax' and a number of concessions for specific groups, this is the first time that the subject sounds like something that could become a reality. The level of 0.1% of value, compared with the 1-2% suggested at some stages, will be a relief to those that may be affected. This almost feels like a new top band or two on Council Tax.
Mansion tax has replaced stamp duty as the tax of choice when discussing property. People, whilst never enjoying paying the 7% that some purchases attract, almost accept it as the norm. I suspect that this will be the same with any 'mansion tax'. Those properties either side of the £2m mark will naturally feel an effect at first. Much the same as those at the £500k mark do with stamp duty. The market simply takes it into account.
Whether the suggested £300m that would be raised by Labour’s proposals is worth the potential effects on stamp duty receipts as well as the message it will send to the international and second home buyers is questionable. Especially when one realised that in 2013 the UK had tax receipts of £1 billion per week.
Many, including Lucian Cook at Savills, believe some form of mansion tax is more likely than not to come in. The market will adjust over time to take any changes into account. The fact is that this tax will hit the south east and areas such as Surrey harder than other parts of the country. However the logic, that if you buy the best, it will always do well, remains unchanged; tax or no tax.