Mansion tax proposals

Vince Cable has confirmed that negotiations to replace the 50p income tax rate with a “mansion tax” are ongoing within the coalition ahead of the Budget.

Cable told BBC Radio 4's Today that while the exact nature of the tax was currently being negotiated, a mansion tax on expensive homes was an "economically sensible way” of replacing the 50p rate.

"If that were to go, it should be replaced by taxation of wealth, because the wealthy people in the country have got to pay their share, particularly at a time of economic difficulty," Cable said.

Is this a sensible suggestion to replace the 50p income tax rate?

What are your views on a mansion tax?

 

Comments
robertlovell's picture

Comments from Vince McLoughlin of Russell New

robertlovell | | Permalink

Key points from McLoughlin include:

  • The Mansion Tax is simply a geographical tax
  • This will further deter entrepreneurs to take risks if all they see is the Government taking yet another significant slice of their success
  • Those living in high value houses have lived in them for many years and are not necessarily wealthy. They may have assets but not significant income
  • If a property is worth just under £2m now Vince questions whether it will it escape the tax forever as property prices fluctuate

Vince McLoughlin said: “The idea of taxing wealth is politically very attractive at a time when the “average” individual in Britain is experiencing spending cuts, wage freezes and slow growth but what does it really do? The proposal to tax properties worth more than £2m is clearly divisive on a North/South bias. Houses of equal size and status are unlikely to be valued equally in Westminster and Wolverhampton – this is a geographical tax.

“Evidence suggests that many of those living in high value houses have lived in them for many years and are not necessarily wealthy –they may have assets but not significant income. Is it fair to tax those on limited income simply because they have had the fortune to live in a house that has increased in value for reasons outside their control? In any event, they will pay their fair share of Inheritance Tax on the property and those who have purchased valuable properties have also contributed a significant amount in Stamp Duty Land Tax and Council Tax. How many more times can they be taxed?

“The tax will require a huge valuation exercise if it is to be based on current values which in itself will be a costly and lengthy exercise. Despite the beliefs of many that property based taxes are easy to administer and hard to avoid, the reality is that the complexities of introducing it are enormous. But if this is to be an annual tax, how are changes in property values to be catered for under the system? If a property is worth just under £2m now, will it escape the tax forever? Property prices fluctuate significantly and two properties seemingly similar can have different values ascribed to them because of what they offer; their location, their condition and so on. Ultimately the actual value of a property is what someone will pay for it but the tax has to be based on an arbitrary valuation which might never be achieved in the real world.

“Those who have helped to create wealth in Britain and have suffered a significant amount of tax in doing so are faced with yet another slice of taxation. How are we to encourage entrepreneurs to take risks if all they see is the Government taking yet another significant slice of their success? The Mansion Tax is flawed in so many respects and a quick fix to satisfy the voters by adopting a politically attractive measure is counterproductive.”

Questionnable basis of 'Mansion Tax' arguments ...    1 thanks

JC | | Permalink

@robertlovell

These are the current facts on domestic rates:

  • There is a cap on the highest band
  • The greater the property price the less percentage of the rates .v. property value

Therefore, with the above points in mind it is apparent that those with higher value properties are currently be subsidised by those lower down the ladder; so the question revolves around whether this is an equitable situation?

The term 'Mansion Tax' is emotive and geared to achieve that goal. Now if we termed it a 'Fairness or Equitable Tax' how would that be percieved? After all should the better off be subsidised by the less well off?

The solution is as follows:

Replace domestic rate bands and implement a flat rate percentage charge for all properties based upon their last sale value recorded at the Land Registry.

Benefits

  • Fair - Everyone pays the same percentage of their house on the most recent sale value
  • Simple to implement – will remove the layers of bureaucracy & avoid costly appeals
  • Easy to universally adjust or alter the percentage rate
  • Uses an existing recording system (Land Registry) as the benchmark
  • No issues of property re-valuation arise
  • Does not penalise those who have been in their property for many years (asset rich/cash poor) - whilst triggering after death (deemed sale for IHT)
  • Automatically keeps itself up to date and re-assess a properties rates on an annual basis based on its most recent sale value
  • Avoids all the other unpalatable issues surrounding the revision of rating bands and also the bad publicity associated with a ‘Mansion Tax’
  • For the future the purchaser is aware of the rates liability at the time of purchase and can decide accordingly

This approach seems to accomodate all the objections raised and more

ShirleyM's picture

It isn't that straighforward

ShirleyM | | Permalink

I agree that this solution would go a long way to resolving the conflict over mansions, but it wouldn't work for the majority. I will play Devils advocate and point out potential arguments:

  • By using the purchase price neighbours may end up paying different amounts for identical properties, and the people paying the highest taxes may be ones who can least afford it.
  • What happens if a house/mansion is inherited, or gifted?
  • It may stop people downsizing and realising the capital from their home, due to higher taxes being demanded for the 'cheaper' property which has a more recent valuation.

Personally, I think the whole thing is rubbish. Just keep the 50% tax in place until the country is in a better financial position, and has more people in employment to share the load, then scrap the 50% and don't replace it with anything!

Creating jobs (but not inventing unnecessary jobs) should be the top priority of the government, as this increases tax take and reduces the amount of benefits paid out.

In answer …

JC | | Permalink

@ShirleyM

Afraid that I don’t follow some of the logic

‘..By using the purchase price neighbours may end up paying different amounts for identical properties ..’

So are we saying that if I wanted to purchase a terraced house today it would be unfair if I had to pay more than someone who purchased the house next door 2,3,4 years ago? Surely these are market forces of supply & demand

‘..What happens if a house/mansion is inherited, or gifted..’

Any change of ownership with new price is recorded as such with a new price at current valuation

‘..It may stop people downsizing and realising the capital from their home ..’

Yes it may, but there are a multitude of reasons for downsizing – one of the classic being releasing lump sum cash from the original property, which would probably not be influenced by the situation (i.e. lump sum of £100K .v. additional rates of £500)

 

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