A new study into the impact of the Mansion Tax – proposed by Labour and the Liberal Democrats – has been completed by property agents Frank Knight.
The tax would be aimed at those with properties valued at over £2million. A charge of 1% would be levied on any value over the £2 million mark, the combined receipts of which would be used to fund the re-introduction of the 10% basic tax rate. The 10% tax rate was abolished in 2008, making the basic tax rate 20%.
The Frank Knight report has cast doubt on the figures provided by Labour and the Liberal Democrats, who say the Mansion Tax will generate £2bn/£1.7bn respectively.
The report suggests that tax receipts would only amount to £1.3bn, which may mean that the tax threshold is lowered to encompass properties in the £1.25m – £1.5m, in order to hit the target.
Asset-rich but cash-poor individuals may also be unable to pay the tax, to the extent that they are forced to sell their home – according to the study.
The report’s authors also suggest that the £2m threshold would not be increased in line with inflation – meaning in 25 years homes currently worth £539,000 would be required to pay the tax.
However, some argue that the threshold remaining static for 25 years is unlikely. As an estate agent with a vested interest in ensuring high value properties remain attractive to buyers, Frank Knight’s findings may be treated with some scepticism.
That aside, any new Mansion Tax would affect thousands of homeowners, some of whom are landlords building insurance customers of Click4Quote.com. Many would ask that the long-term effects of such a levy be fully understood before the tax is implemented.
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