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Advisers warn the cash-poor will be hit by mansion tax

Advisers are warning that the Liberal Democrats’ proposed mansion tax would hit those who are asset-rich but cash-poor and push up rental prices.

A report published this week by the Centre for Policy Studies and Savills says top-end property owners already contribute disproportionately to the overall tax take.

It adds that the LibDem plans for a 1 per cent tax on houses worth over £2m would raise only £1bn a year, just 0.2 per cent of total tax take.

Anand Associates managing director Bhupinder Anand says: “A £2m house would incur a £20,000 tax bill. Unless these homeowners are on very high incomes, they are unlikely to be able to afford it.”

Access Wealth Management financial planner Jim Clancy says: “The question is, who will end up paying this tax? Landlords will pass the cost on to renters which will push up rents in hotspots like London, where large houses are often turned into flats.”

The Government is considering how it could implement the tax and one option is through a new higher-rate council tax band. It says prices would continue to be based on 1991 prices and has ruled out revaluations.

The CPS and Savills report claims that the top 1.6 per cent of house sales in 2010 accounted for 26 per cent of that year’s total stamp duty tax take while the top 0.7 per cent of housing stock contributed over a third of residential property inheritance tax receipts.

Savills director of research Lucian Cook says: “The common perception is that owners of high-value homes pay a disproportionately low level of taxes. This analysis really explodes that myth.”

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