Following an unprecedented leak by the OBR, the government is set to unveil radical new plans which will see the owners of Britain’s most expensive properties paying significantly more in a recurring annual charge of £2,500 for properties worth more than £2m and £7,500 for properties worth more than £5m
Although initially a broader version of the tax, which started at £1.5 million and affected 300,000 households, was under consideration, concerns were raised that the move would affect people who are “asset rich and cash poor”, particularly in London, and the threshold was raised from £1.5 million to £2 million to ensure that the most expensive properties are affected.
The Chancellor aims to accumulate £400-£450 million from the levy, which will be collected through council tax bills and come into effect in 2028.
Tom Bill, head of UK residential research at Knight Frank, comments, “Until the revaluations take place, buyers and sellers face years of uncertainty, especially around the £2 million threshold. Even once completed, new valuations can be challenged, which would prolong the limbo.
“The policy may also raise less than expected, especially because it is deferrable. If opposition parties say they would scrap it, many homeowners will look at the opinion polls and wait it out. When you factor in the cost of carrying out the valuation and the potential lost stamp duty revenue from a stickier market, the sums raised could look like a rounding error for the Treasury.
“More properties will inevitably get dragged into the mansion tax net, which means the proportion of terraced houses, flats and semi-detached homes will grow over the years, particularly in the capital. The term ‘mansion tax’ will increasingly feel like a misnomer."
Matthew Thompson, head of sales at Chestertons, says, “We could see homeowners rushing to sell their home before the new tax takes effect but buyers will think twice to purchase a home that will be subject to such a levy in the future. This could lead to more high-value properties standing empty or force sellers to drastically reduce their asking price.”
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