Liberal Democrat efforts to introduce a mansion tax are in the news once again after Business Secretary Vince Cable went public with demands for it to be implemented in exchange for agreeing to abolish the 50p top rate of income tax.
The calls to charge a one per cent levy on the value of properties over £2m were made public some time ago and with the average price of a London home costing £349,026 – compared to the England and Wales average of £162,109 – it stands to reason that London has more homes costing £2m or more than any other region.
Data from the Land Registry has revealed that 285 properties worth £2 million or more were sold in the Greater London area between October and December of last year, the most recent quarter for which information is available.
The Lib Dems say that a mansion tax would only affect between 70,000 and 80,000 properties in the UK, and would generate £1.7bn each year. A fairer proposal, potentially, could be the introduction of new, higher council tax bands for homes worth more than £500,000, £1m and £2m respectively.
This argument carries some weight considering, at present, a property worth £750,000, for example, is in the same council tax band as a property worth £10m.
Suffice to say, not everyone is keen on the idea of introducing an annual charge on properties worth £2m or more and Richard Barber, partner at upmarket London property agent WA Ellis, is one of them.
He said: “I think it is punitive on people who have no income. If you have an income that is commensurate with the value of your property then you will still think it’s an imposition and I think a lot of people will think it’s an unjust tax.
“I think the great sympathy will be with people who have lived in a house for 30 years who may now be retired and their income might be diminishing because they’re not getting interest on their investments and their pensions are being cut so to some degree they have been reliant on their home as a safeguard against this and the increase in the home’s value. I think it will be a very punitive tax on people in that situation.”
Barber feels there are a number of other ways the government could raise this money.
He added: “Personally, it’s the wrong way to do it. I think you have to tax people on income and via stamp duty on large properties. I think that’s the right way to do it but taxing people because they have been very lucky and have lived in houses for a long period of time and then suddenly they will be walloped because of it I think is unjust.”