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The announcement by the UK’s Shadow Chancellor that the Labour Party will impose a mansion tax on homes over £2 million will put a heavy burden on home owners in London and the South East. Ed Balls has announced that if Labour wins the general election next year the tax will be introduced and the revenue used to increase spending on services such as the NHS. ‘We will do it in a fair, sensible and proportionate way, raising the limit each year in line with average rises in house prices,’ he said. He claimed it was not right that a ‘billionaire overseas buyer of a £140 million penthouse in Westminster will pay just £26 a week in property tax’. Labour would not say how much the mansion tax would raise but the Liberal Democrats who have also raised the idea of a mansion tax calculated it raise £1.7 billion a year, but Labour’s higher bands for homes worth tens of millions could raise more. But with property prices having shot up in the past decade, families who moved into relatively affordable homes could suddenly face huge tax bills because their home has increased in value even if their income has not. Indeed, according to figures from the Halifax House Price Index, a property in Greater London bought for £500,000 in 1994, would now be worth £2,056,381 and according to the Centre for Policy Studies think tank, almost one third of properties worth more than £2 million have been owned by the same people for more than a decade, and around a sixth for more than 20 years. Almost 96% of the mansion tax burden would absorbed by London and the South East with more than 108,000 households nationwide affected by the proposed tax, according to leading property website Zoopla. After conducting analysis of all properties in the UK currently valued at more than £2 million, Zoopla found that in excess of 108,000 households would be liable for the annual levy, at an average of £15,000 each. Properties in London and the South East would account for the vast majority, 95.9%, of the additional £1.63 billion cost with the rest of the country contributing just 4.1%, or £66 million, of the total contribution. ‘The introduction of a mansion tax would disproportionately penalise home owners in London and the South East who are already responsible for the vast majority of property tax take in the UK,’ said Lawrence Hall of Zoopla. ‘With more than 100,000 homes to be affected by this new levy, it is somewhat misleading to call it a mansion tax when many three bed family homes in London and the South East would find themselves caught by it,’ he added. A mansion tax would distort the realities of who own homes in the £2 million plus bracket, according to Nick Leeming, chairman of national estate agents Jackson-Stops & Staff. ‘This will affect people all over the country, not just in… Continue reading →