Research by Savills suggests that the mansion tax could effectively decide which major party wins some key London marginal constituencies on May 7 - and, given the closeness of opinion polls, these seats could decide the whole election.
Savills data, quoted in London's Evening Standard, shows that a quarter of sales of London homes worth more than £2 million since 2011 have been in Labour-held seats. Lucian Cook, the agency's director of residential research, says: Our analysis shows that the mansion tax could be a significant issue for the electorate in a number of key constituencies in London.
The proposed tax may not influence only those with homes valued at over £2m - at which point the tax will start - but owners with properties currently valued at around £1.5m who may fear that appreciation will take their property above the threshold.
The Standard says some of the marginal seats in the capital include Hampstead & Kilburn - currently Labour held but a Tory target seat - as well as Brentford & Isleworth and Battersea, which are Labour targets not currently held by the party.
The paper says Conservatives believe up to 2,000 votes could be swayed in some constituencies by the tax, although Labour insists the issue is not a major one for most voters.
In recent months both Savills and Knight Frank have prominently highlighted the possible effects of a mansion tax, and have suggested possible alternative means of property-related revenue raising, such as reformed council tax.
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Comments
Lorne, why is it better to tax actual work than unearned wealth
Lorne, I pay 40% tax on my earned income of 50k per year. Why should I pay 40% tax on actual earned income, yet someone who bought a property for 50k 20 years ago and has seen it gone up in value to 2 million through no hard work of their own not have to pay even 1% of that unearned profit
thanks Jonathan, and it's not patronising at all. I agree that wealth inequality is growing, and it can be very irksome so see the real nature of some of those who have benefited the most (ie the 'investment' bankers and the woman that used to be called Jordan when she had plastic knockers). There should be a solution somewhere, but I know for certain it's not going to come from property taxes
@Lorne Gifford - I'll get around to remembering my password at some point!
(Hoping not to sound patronising) That is a very good answer, thank you. I suppose I am just frustrated at what I see as the growing inequality of wealth distribution in The UK, more apparent now but seeded by previous Governments of both colours. We have come so far since the inception of the Welfare State but lately it seems to be a rags to riches, to rags again story.
Hi Jonathan, I had to register to reply,
I agree it's not fair that normal people pay the same tax as Oligarchs, but there are only half a dozen of them, and perhaps a thousand bankers that really do deserve to be taxed until they bleed from the nose. Mansion tax though will initially affect 110,000 households, say around 1/4 to 1/2 a million people. That's an awfully blunt sword to needle out a small cancer. If it then evolves into a general home ownership tax it will be hurting about half the people in the country. What you might call the prudent half who put their money in a home rather than a new car.
The British tax system is already highly progressive. To buy a 'mansion', or as I would term it 'a family home in London', you have to stump up 250k in stamp duty, and this is on top of already paying half your money in direct taxation and most of the rest in indirect taxation. There's a report somewhere that has the breakdown of percentage population to tax paid, I think the top 1% come out as paying 30% of all income tax revenue and the top 6% pay over half. Broad shoulder and all that, but if you overload people then it's not surprising when you find the shoulders have suddenly turned themselves into something much slimmer. It's only human nature. People bricked up windows because of the window tax, and the equivalent in today's world is to declare the top floor of your house a granny flat and the basement as an au-pairs flat. Perhaps that's why Ed Miliband has 2 kitchens
@Lorne Gifford - Can't reply to you!
But Lorne we have had 5 years of Tory government (albeit diluted slightly) and SDLT etc still remain. I wouldn't fancy paying lots more tax on my home, you're right but then again, I pay the same tax as an oligarth for my petrol or meal out. The proportion of the tax take required by a country cannot be the same for all across the board. At some point the wealthier have to shoulder more of the burden surely
And if you're a renter rather than owner then take 1% of the value of whatever you're renting and add it to whatever you're paying. Taxing the home you live in is as wrong today as it was in the time of window tax or hearth tax.
Ahh, I get to reply by registering! Simple answer to this Jonathan is to change the policy and then it won't affect the election. If the policy doesn't change and it does affect the election then that wouldn't be so bad a thing considering mansion tax is the thin end of a wedge known as 'general property ownership tax' Remember when stamp duty was just for the rich, or inheritance tax
And it's not a few quid if your in line to pay it. Take 1% of the value of whatever your home is worth today and decide for yourself how easy that is to pay as extra tax year in and year out.
If these Millionaire London residents influence the outcome of an election on which may depend future Middle East Policy, The NHS, Schooling, Tax, Exports, Transport and The Environment (and more), just because they want to save a few quid, they scarcely deserve the right to vote.
Hi Rob
I don't appear to be able to respond directly to comments (no doubt being a none estate agent 'guest').
I use Greece because that's the only European country to try mansion tax in recent years. Don't forget that the starting rate there is now Euro 300k and the UK's ATED tax starting rate is now 500k, so whilst you don't know any current mansion owners you're very likely to know some in the future. You're also likely to know what it feels like to pay tax on something that you bought with tax paid money and paid rather a lot of tax to buy. Home Ownership Tax will affect you or people you know.
Labour and the Lib Dems don't have any counter point against the 1.2bn raised but 2.0bn lost statements. These are from simple mathematics, so simple Ed Balls might even be able to do them (with apologies for an under belt stab at Ed Balls' intellect there). Mathematics show it doesn't work so the only reasons to impose it are:
1) The vote winning strategy of a tax 'someone else will pay'
2) The ability to expand it to general home ownership tax once in power
Your final point, 'do I know anyone that would be affected', well yes, practically everyone on the road I live on in London. Do I know anyone that will pay it when it's first introduced at a 2m starting level, well no I don't, owners of these homes are not stupid. I know that's going to annoy you, but just look at ATED taxation and how that had to very quickly move from a 2m starting level to 500k because at 2m everyone just split their home into legally smaller properties.
We're not Greece, though. That's just a strawman argument made by people who are worried about some of our super-rich upping sticks and moving to pastures new. Gove got called out on it the other day on Question Time - we were never in as dire a financial state as Greece and to compare us is ridiculous. For one, we've got a totally different currency.
You say: "Can I suggest that rather than giggle in glee at the extra tax other people will have to pay". Yeah, a very small minority of people, predominantly located in the South East and London, will be hit by the mansion tax. Not everyone lives in a 2m plus how, in fact very few do. You can get a hell of a lot for your money for that price, even in London.
Do you not agree that the current situation in London is ridiculous Completely unaffordable for many, which means lots of people having to turn to the PRS. Extra demand not only puts extra pressure on this sector, but also sees rents go sky-high and an increase in the number of exploitative and rogue landlords. Obviously, the scare stories in the media are not representative of all landlords, but more of this stuff will happen if the PRS is overburdened with demand.
Meanwhile, you have rich Russian and Chinese investors buying up properties and then leaving them empty. And a massive shortage in housing supply. To suggest things are rosy as they are is blinkered nonsense. The mansion tax wouldn't have the catastrophic consequences you and Neil Wraith say it would.
You've pointed to 2 respected and impartial bodies, fair enough. I bet if you asked Labour or the Lib Dems they could point you in the direction of another 2 bodies who would give you an entirely different picture.
The reason Labour won't increase VAT, income tax or NI is it hits the poor hardest. The mansion tax hits those with the broadest shoulders, the sort of thing that should happen in a fairer, more progressive society.
I don't know of anyone who will be affected by the mansion tax. Maybe I move in the wrong circles. Will you or anyone you know be affected by this And anyway, it's a progressive tax, so those in houses just above the 2m threshold won't be paying as much as those in houses worth 50m, as some have suggested (I'm looking at you Myleene Klass).
I don't think you've understood the whole non-dom debate, have you The point is that the super-rich are in fact not paying their fair share because of an extremely outdated tax loophole.
Anyway, mansion tax won't be an election winner, the NHS, the economy, jobs and living standards will. Besides, it seems inevitable that we're heading for a hung parliament anyway, so all this is a bit redundant. Just shameless electioneering from the Tories.
So, Rob and Jon, you're doing exactly what Ed Balls assumes everyone will do; you're saying 'yes, tax the rich, someone else should pay more tax, I love it', without actually looking at what mansion tax means.
1.2bn in mansion tax revenue, but 2 very respected and impartial bodies say an accompanying 2bn drop in stamp duty revenue.
A starting level of 2m that other UK taxes (including the identical existing mansion tax on foreign owned homes) and other countries that have imposed mansion tax show will most likely be reduced to 250k or 500k within a couple of years.
A pledge from Labour not to increase VAT, standard income tax or NI which means their options for tax raising are very limited.
Can I suggest that rather than giggle in glee at the extra tax other people will have to pay, that you actually look at what this means to you and the country as a whole.
The Greek example is very telling, mansion tax introduced in 2008 and by 2013 anything valued at more than Euro 300k was deemed a mansion. It resulted in a 40% across the board drop in property value, essentially the evaporation of peoples hard earned wealth and savings. And before you say that's a good thing, such a level of deflation also has a strong tendency to collapse an economy (Greece again)
Politics of envy, pure and simple. Like with the proposed abolition of the non-doms, which Ed Balls himself admitted would cost the British people money, this is all a shameless attack on the rich who already pay more than their fair share.
Those poor little grannies in their 2m plus homes, how will they cope
Because it's nonsense. It's scaremongering by the rich and those with a vested interest in the mansion tax - i.e wealthy investors, the Tories, high-end agents like Savills, Foxtons and Knight Frank, and right-wing rags like the Evening Standard.
Neil Wraith has posted exactly this same rant on a number of mansion tax articles on a number of different websites. It all looks quite impressive, until you realise it's a copy and paste job and sound like a press release from Tory HQ/the anti-mansion tax brigade. To suggest it is the worst political move ever is total nonsense.
As with the non-doms furore, certain people are in complete thrall to the very well-off or the super-rich. This needs to stop. We need to return to a property industry where prices are affordable for the many, not just the few. If asking prices in Prime Central London go down from how monstrously expensive they are now, why is that such a bad thing The whole market's not going to collapse because a rich Russian isn't paying 300m for a luxury pad in Knightsbridge.
We've got to a stage where any huge rises in property prices are seen as something to be celebrated, where an average first-time buyer price of 250,000 is seen as a good thing. I'm an agent, but I'm also in the age bracket known as Generation Rent, and my chances of ever owning my own home reduce by the day. It's the same for many other young people, a lot of whom have already given up on the prospect. So excuse me if I don't feel sympathy for someone who lives in a plush 2m plus house.
Yay! You're back again. You've been slacking on the last few mansion tax articles, but you're back with a vengeance now. How I've missed your long, word, politically illiterate copy and paste rant. Brilliant.
Because mansion tax is so tied up in its perception with taxing the rich then no party can actually go into a head on dispute of it without being branded a party of the rich.
The figures shown in the comments below need to make it into the popular press before people will actually understand this is not 'mansion' tax but is the introduction of a General Home Ownership Tax that anyone better than average is going to be paying. The figures are backed up by reports (The office for budget responsibility also say mansion tax will reduce stamp duty revenue by 2bn a year) and by actual evidence (Greece for example, or the upper end London housing market which has currently stalled and is seeing significant reductions in asking prices).
Press reporters no doubt scan websites like Estate Agent Today, so how about some concerted effort to get these points across.
Neil is pretty much spot on in what he says in his comments above, but there are a couple of important points he's missed:
1) By imposing an everlasting tax burden on a home, Mansion tax not unsurprisingly devalues it. Mathematics of the proposed tax rates indicate around 25% devaluation, backed up by Greece where introduction of this tax in 2008 resulted in a 40% drop in value of 'mansions'.
2) The current mansion tax on foreign owned homes (yes it does exist and its called ATED, Annual Tax on Enveloped Dwellings) has been cited as the only mechanism available to collect this tax. ATED was introduced at a starting value of 2m in 2013. Foreign mansion owners of course did everything legally possible to split their houses and fall below the 2m level. So the starting value was reduced to 500k, and the amount payable by each home was doubled. This is a very interesting point as the reduction of the starting level to 500k will drag most 'better than average' homes into paying this property ownership tax.
Mansion tax appeals though because the idea of a tax 'someone else pays' is one heck of a good vote winner for Labour, and people would likely vote for it regardless of any economics simply because of the delight in imposing higher taxes on people who are perceived as 'super-rich tax avoiders who are not pulling their fair share'. It's no point saying the 1% pay 30% of all income tax, because your standard Labour voter simply doesn't care about the fairness of it.
If Labour would stop calling it 'Mansion' tax and instead call it 'Home Ownership Tax' it would be a lot clearer what this tax actually will be; a 1% annual tax on home value per year on anything worth more than average.
Home ownership tax is a whole new thing to do, and just like inheritance tax and stamp duty it will be introduced as 'a tax on the rich' but quickly will become a tax on anyone better than average.
1% home ownership tax would of course decimate the housing market (as it's done in Greece), but the counter argument, likely coming from those that don't own homes, is that that would be a good thing to do.
As I've noted, Greece introduced mansion tax in 2008. By 2013 the Greek government decided anything worth more than Euro 300k was now an official mansion. Once this tax is in, the temptation to pull the starting rate down is so great no government would be able to resist it.
There are a couple more things that really annoy me about this tax. These are just personal annoyances though:
a) Neil Kinnock says 'it's only the cost of a lunch'. Given that the average mansion tax bill will be 16,000 per year that is some lunch! Although to be fair to Kinnock since he did expense 65,000 in lunch money as an EU politician it probably is just the cost of a lunch to him. He also owns 6m of property in the UK, none of which exceeds the mansion tax threshold.
B) Ben Elton says it's a small price to pay to help the NHS and that Myleene Klass should be proud to pay it. Ben Elton though has his mansion in Australia and doesn't pay a penny in UK taxes.
WHY LABOURS MANSION TAX IS ONE OF THE WORST IDEAS IN POLITICAL HISTORY:
1) ITS AN ECONOMIC FALLACY:
(a) Labour claims its Mansion Tax (MT) will raise 1.2b for the NHS. It wont. And heres why:
(i) 1.2b is the estimated GROSS REVENUE (the total revenue that is raised before associated costs and losses are deducted). The NET PROFIT (the actual sum of money that will be raised for the Treasury) will be very considerably less; and is calculated by deducting from the GROSS REVENUE both the administrative costs of operating MT and all consequential revenue losses; which includes (but is not limited to) significant leakage of STAMP DUTY, CAPITAL GAINS TAX, INHERITANCE TAX and INCOME TAX. Hence, even IF 1.2b GROSS REVENUE were to be raised by MT (which is not going to happen), the NET PROFIT (and hence the actual sum of additional money that will be available to be injected into the NHS) will be a mere fraction of this.
(ii) Substantially LESS than 1.2b GROSS REVENUE will in fact be raised. Labour have erroneously done their economic calculations as if MT will be operating within a vacuum; and in doing so have failed to take into account any and all causality effects that will transpire as a result of MT being brought into existence. Such as, for example, the fact that, for many reasons, the number of 2m+ homes will significantly drop.
(b) The NET PROFIT that MT will actually raise won't make ANY significant difference to the NHS whatsoever. Itll be wholly insufficient because the annual NHS bill = 95b, and its shortfall = 30b.
(c) A recent independent economic study by the Centre for Economics and Business Research (CEBR) has revealed fatal flaws in Labours Mansion Tax. The damning report shows that Labours Mansion Tax will cause a 2 billion slump in Stamp Duty. Furthermore, it confirms that the new tax will not raise the planned 1.2 billion for the NHS. The consequential drop in Stamp Duty alone, the report says, will likely be even greater than the proceeds of the new mansion tax rendering it pointless. Mr Cox, who commissioned the CEBR study, said: This report shows that Labour [have] got their sums wrong and suggests their calculations were written on the back of an envelope and not properly thought through.
(d) STAMP DUTYS recent comprehensive updating as part of the Chancellor George Osbornes Autumn Statement, has rendered Labours Mansion Tax redundant. Property expert Alistair Bingle, has said that it "takes away the need for the much maligned Mansion Tax". And yet, Labour are planning to push ahead with its plan for their Mansion Tax IN ADDITION to the considerable increase in STAMP DUTY with respect to properties valued at more than 937,500.
2) ITS MISTARGETED & UNFAIR:
a) 96% of homes affected are in London & SE;
b) Most not mansions but flats (38%) or terraced houses (46%);
c) Most people affected have already paid up to 70% total in taxes already as INCOME TAX, STAMP DUTY, IHT, VAT & CGT;
d) Many are cash-poor. Labours proposed deferral equates to additional STAMP DUTY and/or IHT, which are already highly taxed;
e) CEBR economists have warned that Labours proposed MT deferral will without a shadow of a doubt backfire, because people will simply never sell their homes as a result, blocking the property market and leaving the debts to mount up; and many homes would, as a result, will become unsellable because they would have to pay so much back-dated mansion tax;
f) Mortgages arent allowed for and tax threshold is 42K+ gross household income, so middle-income families with mortgages will be affected, who already have to work hard to be able to pay their bills, and wont be able to afford to pay the tax;
g) The tax penalizes families comprising 3+ generations who have chosen to live all under one roof to save costs;
h) MT taxes only property, not ALL assets, so the super-rich with millions in other assets get off scot-free. MT fails to ensure all the super-rich pay their fair share; some will pay nothing, while others have to pay more than appropriate. For example, with MT someone who owns a singular property worth 2m with a 700,000 mortgage and hence net wealth of 1.3 million will have to pay, but a guy who owns 400 million of assets including private jets, helicopters, luxury sports cars and expensive artwork, and lives in a gigantic castle in Scotland worth 1.8 million would not have to pay a penny. How in what universe is that fair!
3) ITS NOT JUST THE SUPER-RICH WHO WILL BE AFFECTED:
a) A significant number of the super-rich will move their businesses, their wealth and likely themselves too out of the UK, then the UKs economy will weaken and average person suffer as a direct result. The top 1% of the UK's population are responsible for circa 30% of the UK's total tax revenue. The elite class (= top 6%) are responsible for even more than this. Should they choose to move their businesses, their wealth and themselves out of the UK, this would directly cause a drop in tax revenue for the Treasury of UP TO 30%;
b) IHT when introduced was to be paid ONLY by the super-rich but now middle-class families have to pay it. The same will happen with Mansion Tax. Its just a matter of time. UPDATE: The recent independent economic study by CEBR has revealed that the MTs net WILL widen over time to include more and more homes, with 2,000 additional homes becoming affected by the tax within the first 36 months alone.
4) CHARITIES WILL BE HIT:
Lord Winston (Labour peer), who devotes a lot of his time to raising money for charities, has said about the Mansion Tax: It makes it extremely difficult to raise charitable donations. Because [those liable to pay the mansion tax] will start refusing one of the most important areas of [charity] giving, legacy gifts That will affect charities like Cancer Research UK, which relies on legacy gifts, which are in fact its primary source of income. (N.B. A legacy gift is a sum of money that is donated to a charity in a persons will, and hence paid to the charity upon their death). With the Mansion Tax, with respect to individuals who are cash-poor / asset-rich, instead of EXEMPTIONS (which is what is appropriate and much needed) there will only be DEFERRALS of payments, which will accrue and be paid as a lump sum as and when the property owner dies and/or the property is sold. And therein lies the problem the Mansion Tax, being a government tax, will automatically take legal precedence over any such legacy gifts, even when still included in someones will. In other words, in the legal pecking order for receipt of funds the Mansion Tax will rank higher than charities, and hence monies that would otherwise be paid to charities will end up being used to pay the Mansion Tax bill instead.
5) IT WILL FORCE THE CLOSURE OF HISTORIC HOUSES:
The Historic Houses Association (HHA) has warned. MT will affect 1,590 mansions and castles that are a source of tourism and tourist-related income for the UK. These should be exempt but, as is, they wont be. Its a lose-lose, because if Labour makes them exempt then a big chunk of the 1.2b gross annual revenue that is claimed MT will raise will be lost, in addition to the items listed in (1) above. HHA also said the tax would push owners towards financial ruin. But there is a lot more to it than that The houses have a big impact in their area because they provide employment. And such employment would cease, with THOUSANDS of individuals set to lose their jobs as a result. And then theres the local villages and the people living there, who thrive on the business they attain on the back of the tourists who visit and the marketing done by these open mansion houses and castles. Local hotels, B&Bs, restaurants and the like for example. They will be hit hard too.
The crux of the problems with the Mansion Tax is that there are too many flaws and problems, too many of the rich get off scot-free, and too little revenue will be raised to make it worthwhile.
Labours Mansion Tax wins the award for the worst tax idea ever, in that it has the most things wrong with it whilst at the same time raising comparatively an insignificant amount of money for the Treasury. The bitter irony here is that the pathetic sum that Labours Mansion Tax will actually raise, which in reality will only be a few hundred million pounds net profit, won't make ANY significant difference to the NHS whatsoever.