Last year, Ed Miliband announced that if Labour win this year’s election, they would look to introduce a ‘mansion tax’ on homes valued at more than £2 million.
This would supposedly be charged at £250 a month on properties valued at between £2 million and £3 million. Homes over £3 million will be charged at 1% of their capital value.
The revenue from this tax will contribute to a ‘Time to Care Fund’ to help the NHS. It is estimated that by introducing this tax, £1.2 billion will be generated for the fund.
It has not been announced what criteria will be used to identify qualifying properties. The Land Registry can provide a list of all sales of over £2 million but that is only part of the picture. There will be many properties where the price at the time of sale/purchase was less than £2 million but has since risen in value, also many properties would have been purchased in a worst state and had significant restoration to increase the market value.
Council tax bands could be used to identify properties, but these are extremely dated and aren’t really a true guide to current capital values.
Other queries that need to be resolved are whether this is a tax on ownership or occupation. Investors with several properties could face a large sum to pay, unless it gets passed onto the tenant. Commercial property will not be taxed, but this raises issues over shops or offices with flats above it, people who work from home and also farmers who own large farmhouses and land.
If this tax does come into effect, it will be an interesting one to watch to see how it is implemented and rolled out.
For more information about either residential property or estates and investment, contact us on 0115 9888 777.