Liquid error: wrong number of arguments (2 for 1) BBC: How Would A Mansion Tax Work? | Marsh & Parsons Sales and Lettings Estate Agents London

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BBC: How Would A Mansion Tax Work?

Tue 23 Sep 2014

The concept of a "mansion tax" has emerged again- this time at the Labour conference.

Labour leader Ed Miliband said that owners of properties worth more than 2million would face an annual charge.

It is a similar idea to the proposal outlined in the Liberal Democrat's 2010 general election manifesto.

So how could such a "tax" work and who would be affected?

Some analysts have pointed to the complexity of a mansion tax, debated how much would be raised, and discussed the effect on house building.

The image of a mansion for most people is a country home, in acres of grounds, perhaps with a tennis court of stables in view from the window of one of the many bedrooms.

However, owing to the significance of location, homes subject to a mansion tax would be of very different shapes and sizes.

Labour and the Liberal Democrats put the threshold of a tax at properties of 2million.

Properties advertised for sale on internet portal Rightmove with a price tag of 2million include a two-bedroom apartment in an Art Deco building in London, but also a six-bedroom, four-floor detached home in Hale, Greater Manchester.

Estate agent Knight Frank suggests that 36% of 2million-plus homes were detached, 31% were terraced, 22% were flats and 11% were semi-detached.

Yet, there is also a debate over how homes are valued. At present, council tax bands are still based on valuations of homes made in 1991.

Labour are suggesting an annual charge for homeowners with properties worth more than 2million.

However, Labour says this would be a progressive tax, so those with the biggest home would pay proportionately more than those just above the 2million threshold.

That threshold would also rise in line with rising house prices, so homeowners would not be dragged into the tax as a result of their existing home rising in value.

Labour also say there would be protection for cash-poor but equity-rich owners - likely to be the option of paying the charge from their estate when they die.

The proposed scheme would raise 1.2billion a year, Labour say.

In 2010 the Lib Dems proposed a mansion tax based on 1% of a property's value above 2million.

Under this plan, for example, a property worth 3million would face a charge of 10,000 a year. Ths party said the tax would raise 1.7bn a year.

In 2013, David Cameron ruled out imposing a mansion tax. He told the BBC that a "wealth tax is not sensible for a country that wants to attract wealth creation, wants to reward saving and people who work hard and do the right thing."

What has been the reaction?

In a study published in February, the Institute of Fiscal Studies (IFS) said that a mansion tax had a "sensible logic underpinning it."

However, it said the idea was misdirected.

"Rather than adding a mansion tax on top of an unreformed and deficient council tax, it would be better to reform council tax itself to make it proportional to current property values," the IFS report said.

Some housebuilders and estate agents fear that the mansion tax will curtail building of new homes in London and the South East of England, where a shortage of supply has been one of the factors pushing up prices.

"Any policiy initiatives should concentrate on nurturing the embryonic buds of growth outside of London, rather than drastically pruning back healthier branches of the market," says Peter Rollings, chief executive of Marsh & Parsons estate agent.

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