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Mansion tax - who is affected and how?

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The concept of a mansion tax has re-surfaced, this time as a proposed labour policy, having first been mooted by the Lib Dems in the 2010 General Election manifesto.  The mechanics of such a tax might be complicated, here a just a few considerations:

  • Depending on who you believe, give or take a 10% margin of error, there are 100,000 properties in the UK valued in excess of £2m.  Around 80% are located in London and the south east
  • A dwelling valued at £2m can range from a 2 bed apartment in London, to a country home, with acres of land, tennis court, swimming pool etc.
  • Labour says the tax will contribute £1.2bn annually to the exchequer, which works out at £12,000 per property.  However, it is proposed the charge be progressive so the most expensive properties will pay more than those valued at the entry level of £2m.
  • The threshold would rise in line with house price inflation, meaning home owners beneath £2m would not be dragged in over time
  • Cash poor / estate rich occupants might have the option of paying the charge from their estate when they die
  • The biggest obstacle (General Election result aside) appears to be valuing properties, using valuation tax bands that date back a quarter of a century.

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