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Homes worth £540k would face mansion tax within 25 years

Mortgage lender by gross lending

Homes worth £540,000 today would be hit with a mansion tax within 25 years unless the tax threshold is adjusted for house price inflation, research from estate agent Knight Frank suggests.

Both the Liberal Democrats and Labour have proposed implementing a mansion tax on homes worth £2m or more. Under Labour’s plans, a mansion tax would fund the reintroduction of the 10p income tax rate.

The Lib Dems have called for an annual 1 per cent levy on homeowners with £2m-plus homes, including second homes and buy-to-let. The Conservatives have dismissed the idea of a mansion tax as “expensive” and “difficult.”

Research from Knight Frank estimates that in order to raise the Lib Dems’ estimated revenues of £1.7bn, the mansion tax threshold would need to be lowered to £1.5m. To achieve Labour’s estimated revenues of £2bn, the threshold would need to come down to £1.25m.

The estate agent says house prices over the last decade have risen by 69 per cent. It says if the £2m threshold is kept and house prices continue to rise at historical rates, homes worth £1.2m today will be paying a mansion tax within ten years, almost tripling the number of household facing the tax from 55,000 to 157,300.

Knight Frank argues “cash-poor, equity-rich” homeowners who have seen their homes increase in value over the long-term but still earn low to middle incomes may be liable to pay a mansion tax with no obvious means to do so.

Knight Frank head of research Liam Bailey says: “Our calculations point to the threat of the mansion tax threshold being lowered substantially to meet the revenue targets of the political parties.

”Even if the threshold is not lowered, it seems a fair assumption – given it has remained at £2m since 2009 – that it would not be realised in line with house price inflation thereby substantially increasing the number of properties affected by the tax.”

Breakdown of homes affected by Mansion Tax by Borough or Parliamentary Constituency
Rank LocalAuthority Region Now 5 years 10 years

1

Kensington and Chelsea

London

11,955

20,683

35,781

2

City of Westminster

London

8,119

14,046

24,300

3

Camden

London

3,973

6,874

11,892

4

Elmbridge

South East

2,746

4,751

8,219

5

Hammersmith and Fulham

London

2,103

3,638

6,294

6

Wandsworth

London

2,078

3,596

6,221

7

Barnet

London

2,073

3,587

6,205

8

Richmond upon Thames

London

1,839

3,181

5,503

9

Merton

London

1,696

2,935

5,077

10

Haringey

London

646

1,117

1,932

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Comments

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  1. Another bonkers policy from Labour & Lib Dems so they can be seen to have a go at anyone with money.

    Having said that the Tories are doing a good job with the lifetime allowance and contribution cap on pensions.

    If you can afford £2m for a house the majority will be in a position to employ a tax lawyer to get round the tax.

    Like most of these schemes it will probably cost more to administer than the tax it raises.

    Make the tax system simpler not more complicated.

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