MANSION tax – as proposed by both Labour and the Lib Dems – would not raise amounts that the parties have declared as their goals, according to property agent Knight Frank.
Levied at one per cent – equating to an annual average charge of £23,595 per property – it would raise £1.3bn.
Labour believes a mansion tax would raise £2bn, while the Lib Dems estimate a take of £1.7bn.
However new research from Knight Frank says that the only way to raise more would be to lower the threshold, so that more property owners would have to pay the tax.
The Labour proposal is for a one per cent levy on properties worth £2m and above. The Lib Dem proposal is to apply a one per cent levy on the portion of a property value over £2m.
According to the Government there are 55,000 properties worth £2m and over in the UK. Knight Frank says the threshold would need to be reduced to £1.5m to raise the £1.7bn the Lib Dems want, and to £1.25m in order to raise the £2bn that Labour has its eyes on.
Reducing the threshold to £1.25m would affect the owners of 140,000 properties. Furthermore, some of these owners would be today's first-time buyers still paying off their mortgages if they were purchasing homes of up to £600,000 under the Help to Buy scheme: with predicted house price inflation, over the next 25 years, a total of 775,000 properties would be dragged into the £2m-plus price bracket, including all properties with a current value of £540,000.
HMRC reported 3,280 sales of £2m-plus properties last year at an average value of £5.1m. In contrast, the Land Registry reported 1,661 sales of £2m-plus properties in the 12 months to June with a mean value of £3.6m.
Knight Frank has gone with its own figure of an average value of £4.4m for properties worth over £2m.
A mansion tax would be overwhelmingly levied on London and the South-East, says Knight Frank, while owners of listed buildings would also be hit hard. Nearly one in 10 properties defined as 'mansions' would be one and two-bedroom flats.