Labour’s pledge to introduce a Mansion Tax will have a detrimental effect on pensioners, senior figures at the British Property Federation and the Centre for Policy Studies have warned.
Labour’s pledge to introduce a “mansion tax” will have a detrimental effect on pensioners, senior figures at the British Property Federation and the Centre for Policy Studies have warned.
The plan, outlined by Labour leader Ed Miliband at his party’s conference last week, is to fund the NHS by levying an annual tax on owners of properties worth more than £2m. The proposal is similar to that outlined in the Liberal Democrat’s 2010 general election manifesto.
Adam Memon, head of economic research at the Centre for Policy Studies, said the proposal does not account for inheritance tax or the fact most £2m-plus properties are pensioners’ homes.
In a 16-page report, he added: “Rising property prices, particularly in London, are an issue. The IHT threshold would need to be increased to £2.2m to keep pace with house price growth. So the initial £2m mansion tax threshold is completely arbitrary.”
The report also said the policies, if implemented, could result in the creation of 306,500 fewer jobs over the next four years.
Table: Top ten tax policy promises from Labour |
Increasing the corporation tax rate from 20 per cent to 21 per cent. Increasing the top rate of income tax from 45 per cent to 50 per cent. Reintroducing a 50 per cent payroll tax on bank bonuses. Increasing the levy on bank balance sheets. Introducing a tax on houses worth more than £2 million. Imposing a levy on the profits of payday lenders. Reintroducing stamp duty reserve tax. Introducing a financial transactions tax. Introducing a new 10 per cent income tax rate. Cutting and freezing business rates. Source: CPS |
Ian Fletcher, director of policy for the BPF, said the proposals avoid much-needed reform of council tax, and that the £1.7bn to be raised by a mansion tax would have “minimal impact on NHS budgets”.
He added: “This mansion tax is also effectively a tax on London. In an era of supposed greater devolution, further centralising property taxes can only be considered a retrograde step.”
There has been no council tax band re-evaluation since the current bands were created in 1991, meaning new homes are still valued at 1991 prices.
Stuart Law, chief executive of property investment sourcer Assetz, said: “While the spread of property millionaires is more concentrated in the South East, Mr Miliband must not stymie regional growth potential with this ill-thought-through plan. How will it be implemented?”
James Hender, head of private wealth at Saffery Champness, said the plans raise a number of serious issues, adding: “What protection will be in place for individuals who are asset-rich yet cash poor?”
Adviser view
Rick Eling, head of investment solutions for national firm Sanlam, said: “The mansion tax threshold is proposed at £2m – covering about 70,000 homes. But there has been talk of setting it as low as £1m. That threshold could see tens of thousands of new homes each year caught by fiscal drag as house prices rise.”
