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Why the mansion tax won’t work

By: Guest Post  Published Date: 01 Nov 2013 17:29
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The mansion tax is a controversial topic with lots of questions around about how it would operate if it were passed. Both the Liberal Democrats and now Labour have proposed plans to impose levies on expensive properties – in the former’s case they’re looking to impose a one percent tax on homes worth more than £2,000,000 in the UK and maybe even a “supertax” on properties more than £4,000,000.

Meanwhile the shadow chancellor Ed Balls indicated he’d raid millions of homes for some £7 billion pounds in order to fund a tax cut for the low paid – particularly targeting foreign investors.

The problem is that, according to some reports, there’s a real threat of the threshold being lowered to meet the required revenue targets of political parties. And as with Stamp Duty, it can be assumed that this will increase in line with future house price inflation, thus increasing the amount of properties affected by the tax. Some estimates demonstrate that one in ten of all two million plus supposed “mansions” are actually flats!

So, to get the lowdown on what people think of the tax, we asked some estate agents their opinions:

Alistair Boscawen, Best Gapp, an estate agents in Belgravia:

“The mansion tax is yet another ill conceived and badly thought out property tax on the so-called rich and not necessarily so rich, brought in as a tax of envy by the Liberal Democrats and possibly Labour if they get into power. The property market at the £2,000,000 plus level has come under attack and is seen as a means of raising cash by this Government via the stamp duty mechanism which has been raised from 5 percent (£100,000) to 7 percent (£140,000.) All in all a costly exercise for a number of people who will probably be servicing an extensive mortgage and will now have to find the extra capital to stay in their homes.”

Richard Symes, Eden Harper, an estate agents in Battersea:

“Battersea is an area which has some lovely properties that are very expensive so if the Liberals or Labour do put this through it’s likely to go down like a lead balloon! Ultimately it’s a tax on aspiration – once on the property ladder who would try to get a bigger more expensive property if they felt they’d be pulled into another threshold? It’s one of those “well-intentioned” policies which will undoubtedly backfire.”

Ajaye Gopal, Eden Harper, Brixton Branch:

“The mansion tax may affect eventually some of the properties in Brixton but the problem with this tax is fundamentally that it’s so open to being abused. As we know, the stamp duty rate hasn’t gone up, so it’s likely that in ten years a lot more houses will be pulled into the net, unless of course the tax is reversed again. I recognise that some would say there’s a bubble, but don’t think this is the right way to go about it. A better road to take would be to build more houses and increase the supply.”

Ben Javier, LDG, a Central London estate agents:

“I think the whole thing will be complicated as what happens if the market moves down, it’s a mess really and is unfair. The value of someone’s house is not attached to their income. I know people whose properties have increased massively that’s their biggest asset. Salaries are going down at the same time. They always assume everyone who leaves in a two million pound house is a banker. It’s not the case at all!”

Looking at two other examples of tax can help us see where mansion tax might one day lead. Two such examples are Stamp Duty and Inheritance Tax. After having pulled millions of new properties into the higher tax brackets, these levies are now affecting a lot of modest homes in the suburbs, something that wasn't the intention when it was first implemented.

North West News Category: Local News & Events
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