Chart that tells a story . . . mansion tax
This chart illustrates the location of residential properties in England and Wales currently valued at more than £2m.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/
According to data from Zoopla, the property website, the vast majority (79 per cent) of homes with a market value higher than this threshold are in the capital.
Two central London boroughs – Kensington and Chelsea, and Westminster – alone account for 38 per cent of the total. Only 8 per cent of these very valuable homes are outside London and the Southeast.
————
What’s the significance of £2m?
Ed Miliband, leader of the opposition Labour party, announced this week that an annual so-called “mansion” tax would be levied on homes worth more than £2m, should the party win next year’s election.
Zoopla estimates that about 108,000 residential properties currently exceed this threshold. To raise Labour’s stated target of £1.2bn, this would require an average annual tax equivalent to £11,111 for each home that qualifies.
While details of the proposed tax remain unclear, it is expected to take a “progressive” form. Ed Balls, the shadow chancellor, suggested this year that higher bands would be introduced at £5m, £10m and £20m.
Zoopla estimates that London homeowners would end up shouldering 88 per cent of total “mansion tax” liabilities under such a regime.
————
Surely rich Londoners can afford it?
Critics of the proposal say it does not necessarily follow that residents of high-value properties are flush with cash.
Labour said there would be “protections in place” for residents of valuable properties who do not enjoy a high income, such as pensioners. They may also be able to defer the tax until they sell the house.
But there will be many long-term residents who bought their properties for significantly less than £2m before the recent boom. Estate agents Savills said that in 2003, the average house price in Kensington and Chelsea was £658,000. By 2013, it was £1.66m.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/
What about existing property taxes?
Residential property transactions are subject to rising rates of stamp duty land tax calculated as a percentage of the total sale price. Since 2012, home purchases of over £2m have been subject to the highest SDLT rate of 7 per cent, so an acquisition for £3m incurs tax of £210,000.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/
Expensive homes owned by a company are also liable for the annual tax on “enveloped” dwellings (Ated), introduced in April 2013. Those valued at more than £2m are subject to an Ated charge of at least £15,400.
James Hender, head of private wealth at accountants Saffery Champness, says that the mansion tax proposal raises the question of double taxation for properties held in corporate structures.
————
Who will decide how much homes are worth?
It’s not clear. Council tax valuations cannot be used because they are out of date. For Ated, the valuation used is as of April 2012 or the most recent purchase price, with revaluations every five years. Owners may use a surveyor or value the property themselves, but HMRC can challenge those it suspects of deliberately undervaluing their properties.
The number of properties affected by a “mansion tax” would be much greater, though – HMRC says that Ated indirectly affects roughly 12,000 individuals – and critics say there won’t be enough surveyors to value them all.
