Man­sion tax causes a stir – but what would it mean?

Buckinghamshire Advertiser - - WWW.GETSBUCKS.CO.UK -

THE an­nounce­ment at the Labour Party con­fer­ence that the party wanted to in­tro­duce a man­sion tax on prop­er­ties worth more than £2mil­lion caused a big stir, not least be­cause of the lack of de­tail on how much the tax would be and how it would be im­ple­mented.

But in a re­cent Evening Stan­dard ar­ti­cle, the shadow chan­cel­lor filled in some of the gaps:

The £2m thresh­old will rise in line with prop­erty prices, to stop more prop­er­ties be­ing drawn into the tax as a re­sult of in­fla­tion.

It will be pro­gres­sive tax, so that prop­er­ties worth tens of mil­lions make a big­ger con­tri­bu­tion than those just over the limit.

The tax will be banded, with dif­fer­ent rates by price bands. Homes be­tween £2m and £3m will pay about £250 per month.

There will be pro­tec­tions in place for peo­ple who do not have high in­come but hap­pen to live in an ex­pen­sive prop­erty – de­fined as those earn­ing less than £42,000 a year. They will be able to de­fer the pay­ment un­til the prop­erty changes hands.

At val­ues clos­est to the thresh­old, the tax bur­den is likely to be less than pre­vi­ously ex­pected, con­firmed by Ed Balls’ prom­ise of homes worth be­tween £2m and £3m pay­ing no more than £250 per month.

Given the rel­a­tively low amount of coun­cil tax paid by higher value prop­erty own­ers and pre­vi­ous wor­ries that the tax rate would be puni­tive, this is some­thing of a re­lief.

The tax will be based on a flat charge per band, which means that the charge will be stair­cased as you go up the price bands.

An­drew Ri­ley, as­so­ciate di­rec­tor of Hamp­tons In­ter­na­tional in Ger­rards Cross, said:“In terms of mar­ket im­pact, if the tax were to be in­tro­duced it would cause some bunch­ing around the thresh­olds.

“It would also put some down­ward pres­sure on house prices now as the fu­ture cost of the man­sion tax was dis­counted from the sale price.

“But this would be a one-off adjustment as the tax is fac­tored in, so there is un­likely to be con­tin­ued dis­tor­tion un­less the tax rates change.

“In the short term, un­cer­tainty about the tax is likely to cause some flight into lower priced prop­er­ties. Trans­ac­tions could be brought for­ward as own­ers down­size to avoid the tax, which would put some down­ward pres­sure on prices.

“But it’s un­clear how far own­ers will be pre­pared to move to avoid the tax as cal­cu­la­tions would have to take into ac­count mov­ing costs and any ad­di­tional costs such as longer com­mut­ing.

“Sim­i­larly, split­ting a prop­erty into flats to avoid the tax has con­se­quences beyond liv­ing space as the cost of con­ver­sion has to be weighed up against the cost of fu­ture tax.

“Un­doubt­edly the un­cer­tainty around the pol­icy will cause some ex­tra­or­di­nary ac­tiv­ity in the mar­ket as buy­ers and sell­ers ne­go­ti­ate over prices in an­tic­i­pa­tion of pol­icy im­ple­men­ta­tion. But there are other im­por­tant uncer­tain­ties too, not least how to value prop­erty and keep the val­ues re­al­is­ti­cally up­dated. That will take some time to work out and will have to be com­pleted be­fore a tax could be levied.”

For more in­for­ma­tion on how a man­sion tax could af­fect you, please con­tact An­drew Ri­ley, Hamp­tons In­ter­na­tional on 01753 886 464.

LO­CA­TION, LO­CA­TION: The orange dots show where prop­er­ties af­fected by a pos­si­ble man­sion tax would be sit­u­ated

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