In August last year Manse and Garret blogged about the mansion tax proposals which had been floated at the recent Liberal Democrat conference.
The idea went away almost as rapidly as it had appeared with senior Tories, such as Boris Johnson and Eric Pickles, arguing it would punish people for enjoying a buoyant property market, particularly in London.
However the issue is back just in time for the Budget with many suggesting that a mansion tax on properties worth over £2 million could be introduced to buy Liberal Democrat support for the abolition of the 50p tax rate. It’s not exactly clear how the scheme would be administered but the system favoured by Vince Cable, Business Secretary, is a 1 or 2% annual rate on the value of the property over £2 million.
The primary argument in favour of the mansion tax is that it is a tax on ‘wealth’ as opposed to a tax on ‘income’. However at Manse and Garret we see on a daily basis that this simply isn’t the case. We deal with properties costing over £2 million and they are a far cry from a mansion. In prime central London £2 million normally only buys you a flat, usually a leasehold one – which means that you don’t really own the ‘mansion’ you have bought. In the London surburbs – Richmond, Putney, Muswell Hill, Highgate – over £2 million will get you a house but at less than £3 million it’s often semi-detached, with very little garden to speak of and it’s on a typical residential street.
The simple fact is that if you picked these properties up and placed them in any number of good postcodes around the country – Lewes, Solihull, Alderley Edge– they wouldn’t fetch £1 million, let alone £2 million and above. So what we really have is a tax on London and it’s environs. The tax will not even affect wealthy Londoners but rather people who are asset rich, many of whom have chosen to buy in and around London because they work in the city.
They are being punished because they want to raise their families in a nice environment without a lengthy commute at either end of their busy working day or because they want to enjoy central London entertainment and shopping resources as a reward at the end of their long working day. The notion that the people buying the properties in London worth over £2 million are all fabulously wealthy, non-working and lazy individuals with money from some unknown but ultimately bottomless source is a myth.
They are hard working individuals who contribute to the economic worth of Britain every day. That’s why Manse and Garret do not favour a mansion tax, but if George Osborne decides that he does on Wednesday 23rd March we will continue to be committed to helping our clients find fabulous properties, which will retain their value and make the mansion tax seem like a small price to pay for owning such a good investment.