“Some Treasury officials are understood to be keen on introducing what has been described as a ‘recurring’ wealth tax that would primarily affect London and the South East, possibly as a quid pro quo for cutting stamp duty,” the paper said on its front page on Saturday morning.
The plans were met with disbelief by many given how anti the Tories had been to similar plans put forward by the Liberal Democrats in 2012 and then later Labour leader Ed Miliband in the run-up to the 2015 general election.
On February 14 2013, then-Labour leader Miliband promised to implement a mansion tax on high value properties, but the policy proved highly controversial and was seen as a contributing factor towards Labour’s defeat at the ballot box.
Camilla Dell, managing partner at independent buying agency Black Brick, said: “Given the Conservative Party were very critical of mansion tax when it was first mooted by the Lib Dems and Labour, we find it extraordinary that they are now considering bringing one in. It would not be helpful or welcomed. Even Labour thought a mansion tax was too radical.”
During last year’s general election campaign, Shadow Chancellor John McDonnell told the Financial Times that Labour would no longer support a mansion tax as it may be considered too radical.
But the Telegraph suggests that the Johnson government is considering two options – one, a yearly levy on high value homes along the lines of the original Miliband proposal, and secondly, an additional higher level of council tax for the most expensive properties. However, no details of price thresholds or tax levels were mentioned in the article.
“Some Tory advocates of the move point to New York, where property taxes are much higher,” the paper said.
“The talks [on a possible mansion tax] come as Treasury officials have privately compiled a lengthy menu of tax rises, including the proposed levy on expensive homes, capital gains, other stealth raids on business and even inheritance tax to pay for increased public spending while sticking to the Chancellor’s new fiscal rules.”
Marc von Grundherr, director of London-based agency Benham and Reeves, said he was baffled by the prospect of a mansion tax announcement in March’s Budget.
“It’s rather tiring to once again be facing down the barrel of potential Mansion Tax, an ill-thought-out approach and one we would expect to be pioneered by Robin Hood himself, not a Conservative government,” he commented.
“Investment into London’s high-end market, whether it be domestic or foreign, is vital in order to keep the cogs turning across the board, particularly in recent times where the average homeowner remained sat on the fence for so many months, with top-end transactions helping to keep the market’s head above water.”
He said there had already been one financial attack in the form of a rise in stamp duty thresholds ‘and to now implement further restrictions just as we’ve seen the bottom of the market and momentum is returning could be a very poor move indeed’.
Von Grundherr argued it was nothing more than another London tax, ‘bringing about yet further obstacles’ to deter buyers at the top end. He added that those ‘savvy enough’ will no doubt ‘find loopholes to avoid such nonsense’.
He went on: “Whether we like it or not, London is the cornerstone of the UK market and it needs cultivating, not razing to the ground for no reason other than to fill the government’s coffers.”
The shock revelation that a mansion tax was being considered came just a few days after the Johnson government gave a strong show of support to the stamp duty reforms in 2014 introduced by then-Chancellor George Osborne.
Although many agents, investors and industry commentators point the finger of blame at Osborne’s reforms for introducing a high levy of stamp duty on expensive homes, and Johnson said during his election campaign to become Conservative leader that he had strong reservations about stamp duty levels, the Treasury spokesman in the House of Lords - the Earl of Courtown – said last week: “The government has already made substantial reforms to the taxation of housing. At Autumn Statement 2014 the government reformed SDLT on residential properties, cutting the tax for 98% buyers who pay it, unless they are purchasing additional property.”
This suggests there will be nothing on this front in the upcoming Budget, although the additional 3% stamp duty surcharge on non-UK residents – on top of the existing 3% surcharge that all buy-to-let and second home owners must pay – is expected to be announced.
Dell said her agency strongly opposes an increase in stamp duty for overseas buyers, which is at odds with the “London is open” message, ‘and will not in our opinion help to solve homelessness in the capital’.
She added: “As we have said many times before, more affordable housing is needed. Not increased taxation from what are already eye-wateringly high levels of stamp duty. All this does is slow the market, reduce the number of transactions happening and reduce tax contributions.”
Dell concluded: “Continuing to tinker with stamp duty and introduce a mansion tax would be extremely damaging to what has been a very fragile market that has only just started to show signs of recovery.”
The next Budget is set for Wednesday 11 March 2020, but whether this date will be kept to now that Javid has gone is unclear. Rishi Sunak, a rising star in the Conservative Party who was used extensively as the party’s spokesperson during the December 2019 election, was yesterday announced as his replacement.
He was previously chief secretary to the Treasury from July 2019 and before that was parliamentary under-secretary in the Ministry of Housing, Communities and Local Government from January 2018 to July 2019. He has been the Conservative MP for Richmond in Yorkshire since 2015.