The requested news item does not exist. Please return to News
High-value property taxation, referred to as the ‘Mansion Tax’ proposals have re-emerged to claim headlines yet again in the national press
London, 21st October 2014 - High-value property taxation, referred to as the ‘Mansion Tax’ proposals have re-emerged to claim headlines yet again in the national press. This Labour policy announced to much fanfare at the party’s annual conference last month, that an annual charge will be applied to properties valued at over £2 million.
JLL has consistently argued that this proposed tax has serious shortcomings. First, the valuation of properties will be borne by the owner once every 5 years, unnecessarily increasing costs for thousands of homeowners at or near the £2 million threshold. Secondly, it imposes a significant ongoing cost to high-value property owners, many of whom will be on relatively modest incomes and/ or pensions. Labour has suggested some relief will be available in this circumstance, but the tax liability build up could be very significant over time. The term ‘mansion tax’ is itself a misnomer, in many instances being applied to previously modest family homes that happen to be located in what have later become high-value locations.
The Labour party see this as good politics, by targeting a relatively small number of potential voters, to raise potentially £1.3 billion but with the top 1% of UK taxpayers contributing circa 30% of all income tax, it wouldn’t take much to see any gain outweighed by forgone tax revenue as high earners move their base and business activities elsewhere. Rather than a tax on high-value property, it ends up disproportionately impacting on London, the engine of UK economic growth. High-earners under our progressive tax system already pay a disproportionate share back to the Treasury; there will be a point when the UK is no longer competitive amongst global peers and weakens the enviable position is currently enjoys as the world’s de facto capital city.
It should be said that some of the misleading commentary regarding the implications for the wider housing market are incorrect. The resilience of the UK housing market extends well beyond this disruption at the top-end and is based on sound economic growth fundamentals. However, demand pressure in the price bands below this threshold will increase in the short-term, creating further unhelpful upward price pressure on more modest family homes.
JLL believes the more pragmatic and deliverable solution to targeted taxation of high value properties would be through a new higher rate council tax band. Transparent, logical and less expensive to administer – for both the homeowner and Government – the high rate council tax solution could achieve the same financial gain for the Treasury, but with less uncertainty and waste for the housing market.
Adam Challis, Head of Residential Research at JLL.
Head of Residential Research
+44 (0)207 399 5324
Associate Director - UK PR
+44 (0)207 087 5108