A “Mansion Tax” would effectively be an eviction order, forcing many residents to sell.
Properties near the £2 million threshold face severe market disruption
A “Mansion Tax” will accelerate the demographic change of London. London is already experiencing high levels of overseas investment, making central London unaffordable for many Londoners and ordinary people who live and work in the capital.
The political reality
The Mansion Tax is a political tool to create factions in the electorate and pit them against one another. The policy plays to a narrative of resentment against bankers, tax avoiders and “fat cats”, whilst not producing meaningful tax revenues.
Homeowners should be aware that when the Government introduced the Annual Tax on Enveloped Dwellings (“ATED”) in 2012, it was initially introduced on properties worth £2 million. A year later this was lowered to £1 million; the year after that it was lowered to £500,000.
The proposal to allow basic rate taxpayers to roll up the tax until sale or death will force many retired people to choose between giving up a part-time job or crossing the income threshold and incurring a huge cash bill.
Principles of UK taxation
UK assets have always been taxed on sale through Capital Gains Tax and Stamp Duty. This is to reflect the well-established principle that tax should only be raised from cash available on sale or purchase. The Mansion Tax ignores these fundamental, long-established principles.
The Mansion Tax is a Wealth Tax
The Mansion Tax is a wealth tax. The most recent attempt to introduce such a tax was made by the then Chancellor of the Exchequer, Dennis Healey, in 1976. Mr Healey abandoned the idea and himself admitted that it was “impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.”
Wealth taxes have been unsuccessfully introduced in other European countries. Austria, Denmark and Germany abandoned them in 1997, Finland and Luxembourg in 2006, Sweden in 2007 and Iceland in 2014. In 2014 President Hollande of France was forced to reform the French wealth tax.