It has lots of original features. It is close to good schools, and with a few cans of Farrow & Ball it will make the perfect family home. The estate agents already have lots of familiar lines they use to sell a property. From next year, they will have one that will be more crucial than any other: it is priced at £1.95 million, just escaping the new ‘mansion tax’ introduced by the Chancellor Rachel Reeves in her Budget. In effect, we have just introduced a price limit on houses – and it will distort the market even further.
The UK has had some spectacular badly designed taxes over the decades. But the new mansion tax looks set to prove one of the worst
The UK has had some spectacular badly designed taxes over the decades. But the new mansion tax looks set to prove one of the worst. An additional £2,500 in council tax will be imposed if your home is judged by the Valuation Office to be worth more than £2 million. This rises to £7,500 for homes over £5 million. Property lawyers can expect a bonanza as these values are challenged. But one point is surely clear. Anyone who wants to sell their house at anything close to the threshold will have to stay below it. If you want to sell a property at £2.1 million or £2.2 million you can forget it. It won’t get any viewings, never mind an offer.
There are two big problems with that. To start with, it means the tax will raise far less than forecast. Although it will probably come as a surprise to the wonks at the Resolution Foundation who now staff the Treasury, people don’t like paying taxes very much. They will try do everything they can to keep the price below £2 million to avoid the tax, even if it means devaluing their home.
Next, it distorts the housing market even further. We already have stamp duty that rises to 12 per cent on the most expensive homes, with extra levies if it happens to be a second home, or you come from a different country. And we have additional council taxes for second homes as well. On top of that, we are now going to add an additional levy.
The UK already had one of the most dysfunctional property markets in the world. The new mansion tax will make that even worse. It will stop people from moving and make it harder for younger families to purchase the kind of houses they need. Sure, it might make the class warriors on the Labour backbenchers happy. But it is the last thing the country needs.
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