We don’t need a mansion tax, the UK’s property taxes are high enough as it is11 March 2015
The idea of a mansion tax has many an asset-rich Londoner quivering in their boots. After all, it’s simply not fair, they think (to use that word so easily bandied around by politicians). They’ve worked hard, paid tax all of their lives and purchased their property maybe decades ago – it’s not their fault that the price of the house has rocketed so disproportionately.
Maybe some first-time buyers would disagree with such a view – we’ve already written what we think about the mansion tax – and unsurprisingly we’re not fans of this punitive tax. The Labour Party has said they’d introduce it if they form a government after May’s general election on properties worth over £2m claiming that it’s ‘fairer’ (that word again) than the current system. However, the truth is that as a proportion of the total tax received, UK property tax is in fact higher than in any other country looked at by The Organisation for Economic Co-operation and Development (OECD). Yes, our stamp duty, council tax and business rates mean that according to popular assumption, the UK has the steepest property tax in the world and it’s been this way for decades.
Researchers found that £1 in every £8 paid to the taxman is levied on people’s homes and business premises. This has risen from £1 in every £12 in 1990 and figures show that the government raked in almost £65bn in property taxes in 2012, an increase of £6bn in just three years. The OECD looked at 34 mainly rich nations, from Japan to the United States and discovered that £1 of every £18 of tax paid was on property, while in Austria it was £1 in every £77 and in Australia and France £1 in £12. UK taxpayers also pay the highest property taxes as a proportion of the country’s economic output or GDP, according to the OECD – 4% of GDP in comparison to an average of 1.8% across the other 34 nations.
And the amount of tax raised from stamp duty is only going to increase, after the changes were introduced in December’s Autumn Statement by Chancellor George Osborne which altered the ‘slab’ nature of the tax to ‘progressive’. Nearly 100% of buyers will save money, but the £250,000 threshold has been left untouched, meaning that more and more people will be pulled into paying stamp duty. Those in London and the South East will be most affected as they could well have to pay more than £925,000 for a house and will therefore have to pay more stamp duty.
As well as this, a mansion tax set at 1% of the value over £2m wouldn’t necessarily bring in as much money as predicted. The Labour Party says the levy would raise £1.2bn, yet some pundits say figures show that it would only bring in £1bn – or 0.2% of tax revenues. It would also unfairly target the income poor, equity rich and would be very difficult and expensive to implement. The amount of tribunals that could result would likely make the policy financially unsustainable and could put investors and businesses off coming to London.
So let’s not kid ourselves that people with expensive houses are somehow profiting at everyone else’s expense – they’re instead having to cough up substantially in comparison to property owners in other Western countries.
If you are worried about the effect of mansion tax on your portfolio, you can contact our accountants for an initial free consultation in our offices at 9 Albert Embankment in Central London. For a top-quality, professional chartered certified accountants service in London, why not give us a call, or email Brian.