Property experts have slammed Rachel Reeves’ latest idea for plugging the gap in the UK’s financial purse, saying a mansion tax is “short-termist” and could see even more wealthy people relocate overseas. One said such a move would punish those who have worked hard and planned responsibly for their future, while another added it would “kill off the upper end of the property market”.
Under the plans apparently being considered, higher-rate taxpayers would pay 24% of any gain in the value of their property, while basic rate taxpayers would be liable for a 18% charge. The tax would apply to properties valued at £1.5m and above.
Harps Garcha, Director at Slough-based Brooklyns Financial, said people in London and the South East would be hit particularly hard: “The government’s plan will have a massive impact on London and the South East, where many middle-class families have sacrificed themselves for years to build wealth through their homes.
“These homeowners expected to rely on that equity in retirement by downsizing, yet they now face being taxed twice, first through Stamp Duty and then Capital Gains. Rather than rewarding prudence, this policy punishes those who have worked hard and planned responsibly for their future.
“It seems the government is looking to encourage people to become more state-reliant rather than being responsible and self-sufficient.”
Cameron Scott, Broker at Archie John Financial, added: “Instead of spending all their time researching ways to further tax people, the Chancellor and her team should spend time finding ways of reducing their spend or using current tax receipts more productively. The number of people leaving the UK is on the rise, and with the increased cost of living I think this move could push even more people away who are currently sat on the fence.
“Following this, where does the demand come from for higher value homes? This will shock the higher end of the market where lenders are already reducing property valuations for mortgage purposes.”
Stephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, also said more people could head overseas: “This would be an easy target for the Chancellor as a public uproar about those living in homes over 1.5 million paying more tax is unlikely. It may make more sense if it applied to additional rate taxpayers and the super wealthy, as I can see a lot of families in London being caught with this higher tax bill, and it may push more wealthy tax contributors to exodus the UK, which is already a problem following the Chancellor’s last budget.”
Rob Mansfield, Independent Financial Advisor at Rootes Wealth Management, said: “This is another short-termist move to try and plug the government’s coffers, seemingly without much thought to the future and what knock-on effects it might cause.
“We need a dynamic housing market where people end up in the right home for them, not a market where people could be discouraged from downsizing. If the purchase price was recalculated to allow for inflation and the £1.5m level is inflation proofed then this could be interesting.”
Scott Gallacher, Director at Leicester-based Rowley Turton commented: “As always, the devil will be in the detail but on the face of it this would kill off the upper end of the property market. And I’d question how this would be applied. It would be insane if it creates a cliff edge in that properties over £1.5m are subject to Capital Gains Tax on the entire gain, as properties sold at £1.49m would incur no CGT whereas £1.5m might be a six-figure bill. If it’s only on gains above £1.5m, then the CGT raised would be minimal, as potentially you’d be exempting six or even seven-figure gains.
“Finally, the 18% rate is a red herring, as almost anyone subject to CGT on selling a house worth over £1.5m is going to find themselves as a higher rate taxpayer purely due to the gain. Consequently, most people subject to this would be paying 24%.
“Homeowners, especially older ones, who perhaps bought their houses in the 1970s or 1980s, would be daft to sell and incur a huge CGT liability. Instead they would be incentivised to hold on to the home until they die and pay no CGT.”
David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth Ltd, described the idea as “mad-cap”: “Rachel Reeves is really rustling through the rubble of failed ideas looking for answers to plug this fiscal gap. While this policy is unlikely to affect the majority of the public, in London and the south-east, £1.5m isn’t going to buy you a mansion.
“If this mad-cap idea goes through, some estate agents will need to start offering tissues on valuations with potential buyers. The property market is already jittery, and this can only unsettle things further.”
Source here.
