Chancellor of the Exchequer Sajid Javid is toying with the prospect of raising taxes for the wealthiest of homeowners by introducing a so-called ‘mansion tax’.
This could be levied by the central government or through local authorities by raising council tax for more affluent individuals.
But Tom McPhail, head of policy at Hargreaves Lansdown, warned elderly individuals may be hit hardest by this tax as they may have little income despite being asset rich.
Mr McPhail said: “A mansion tax is superficially attractive but difficult to implement without some very unpopular consequences. Many elderly homeowners are asset rich but cash poor. Imposing an annual charge could create serious cash-flow issues."
But he added: “In theory the charge could be introduced with a deferral mechanism, with the levy eventually being picked up from their estate.
“The mansion tax could stimulate more property sales as well as increase demand for equity release.”
Gemma Harle, managing director of Quilter’s mortgage network, agreed the tax would unfairly disadvantage certain individuals.
Ms Harle said: “While details of how the tax would work are thin on the ground at the moment, it would clearly disproportionately impact the South East and in doing so add weight to the view that the Tories are no longer a party for the elite south.
“However, such a policy would undoubtedly prove to be very unpopular among many Conservative voters and is surely a step too far.”
The idea of a mansion tax was first raised by former Labour leader Ed Miliband in 2014.
Announced at the party’s annual conference in September 2014, Mr Miliband suggested there should be a levy on properties valued at over £2m to help fund the NHS.
Hargreaves Lansdown has also called on the government to review its policies on pension taxation, inheritance tax and Isa regulation in his upcoming Budget on March 11.
Mr Mc Phail said: “We have asked the Treasury to open reviews to explore options for reform. On pensions in particular, where there has been speculation around the possible cutting of higher rate tax relief, we have argued reform is essential but this should be the result of a considered review rather than a quick fix approach. Simply cutting higher rate relief would be unnecessarily brutal.”
Mr McPhail said inheritance tax needs to be simplified so fewer people turn to trusts to avoid complicated tax law.
And although Isas are already simple enough, Hargreaves Lansdown has suggested restrictions should be removed so that savers can save into more than one Isa at one time.
Mr McPhail said: “Notwithstanding current speculation of possible tax raids in the Budget, this isn’t the moment to hit the panic button.
“It always makes sense to take advantage of all allowances and exemptions ahead of a Budget and indeed the tax year end.
"So use your Isa and pension contribution allowances as much as you are able, invest for the long term where you can; use up capital gains tax exemptions ahead of the tax year end.”
amy.austin@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know
