New independent research has confirmed that tens of thousands of terraced houses and even flats are set to be dragged into Labour’s and the Liberal Democrats’ “Mansion Tax”.
Greg Hands MP has long warned that the so-called “Mansion Tax” (which could be more accurately described as a “Homes Tax”) could in fact become a tax on everyday terraced houses and even flats. New research published by the estate agents, Knight Frank, has shown that since the Homes Tax has been under discussion, properties valued as low as £1.2m in 2009 have now been brought within its scope. The effect of more properties being captured by the fixed threshold of the tax as their value increases is known as ‘fiscal drag’.
An annual tax on £2m+ properties, was first proposed by the LibDems in late 2009. Revised proposals from the Labour Party last week point to the introduction of indexation to raise the £2m+ threshold over time, in order to avoid future fiscal drag, from the moment the policy is introduced. However, fiscal drag, through house price growth – especially in London – since 2009, has already led to a doubling in the number of properties defined as “mansions” compared with initial estimates.
Official government estimate for the number of £2m+ properties in the UK in 2009 was 55,000. Since then, the UK as a whole, and especially London, has seen some degree of house price growth, meaning that many ordinary homes which were not considered “mansions” in 2009, have effectively been re-designated as such.
According to the Knight Frank research, the lack of indexation of the £2m threshold since late 2009 means that UK properties worth £1.8m at that point have now become “mansions”. In Outer London, properties valued at £1.5m and in Central London those valued at £1.2m respectively in 2009, have now become “mansions”.
Responding to the research, Greg Hands, MP for Chelsea and Fulham said: “This new research confirms what I have long warned: that Labour and the Lib-Dems’ proposed ‘mansion tax’ is really a tax on terraced houses and even flats in this part of London, and therefore an extremely damaging idea. Far from hitting just the super-rich who may be able to afford such a levy, it would attack ordinary families in more modest homes. There is a real danger that if Labour were to get in at the next election, either by themselves or supported by the Lib-Dems in a coalition, that they would implement this policy.”
At the 2012 Conservative Party conference the Chancellor of the Exchequer, George Osborne, confirmed that the present Government will not be introducing any mansion tax. Instead, this Government is keeping council tax down for hardworking people, with bills cut by 11 per cent in real terms since 2010.