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The Shrinking Case for a Mansion Tax

Mansion Tax is outdated and unnecessary: top 1.6% of households already contribute 45% of Stamp Duty

New research published today by the Centre for Policy Studies reveals that any case for a Mansion Tax is now redundant as recent tax reforms have significantly increased the tax burden on higher value properties.

The Shrinking Case for a Mansion Tax, by Lucian Cook, Director of Research at Savills, shows that properties that would be targeted by a Mansion Tax have already been subjected to significant tax hikes since the policy was first mooted five years ago:

  • Recent Stamp Duty Land Tax reforms have increased the tax burden on “Mansions” by £1.1 billion – the top 1.6% of households now pay almost half of all SDLT.
  • The introduction of, and recently increased rate of, an Annual Tax on Enveloped Dwellings has added at least another £100 million a year to the tax paid by “Mansions”, closing the loopholes which existed when the Mansion Tax was first proposed.
  • As an example, the tax paid on a house now being sold in SW London for £2.5 million has increased by 405% since 2009.

Lucian Cook comments:

“The recent reforms of property taxation are raising as much from high value properties as any Mansion Tax. If in addition to these reforms, a Mansion Tax were introduced after the next election, it would add a layer of complexity and unfairness into the tax system for residential property. On top of that,  the economic impact of a Mansion Tax is impossible to quantify but would clearly be damaging, not least in seriously undermining the attraction of the UK (and London in particular) to overseas investors.”

Tim Knox, Director the Centre for Policy Studies, comments:

“The proposed Mansion Tax is little more than an appeal to envy, and should not be presented as an integral part of any coherent manifesto. Consider, for example, Labour’s and the Liberal Democrat’s support for the Dilnot proposals to reform long-term care for the elderly: these were intended to address the concern that many individuals are today driven to sell their homes to pay for their long-term care in old age. That is considered to be a bad thing for the individuals concerned. So where is the coherence in the same parties now proposing a policy which could similarly drive cash-poor, asset-rich households to sell their houses?

No. For economic recovery, the UK does not need new taxes targeted at the aspirational, the successful and sometimes the fortunate. Rather, it needs lower, simpler taxes which encourage innovation and productivity and which stimulate, not penalise, wealth creation.”

Click here to read the full report.

Media Impact: 

Lucian Cook - Wednesday 18th February 2015