UK: Labour plans to create a new tax on properties

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( – The economic advisors of Labour Party in United Kingdom have presented the Economic Electoral Manifesto for Ed Milliband, who has to face the forthcoming 2015 General Elections. Labour bets on new taxes on wealth, giving more weight to this type of taxes in fiscal policy. In this sense, Milliband’s advisors have proposed the creation of a new tax on ultra-high-value properties known as ‘Mansion Tax’.

Some people are really concerned by this proposal because Labour is ahead in the polls and threatening the leadership of Prime Minister Cameron. Roughly 95,000 homeowners are likely to pay this “mansion tax” on properties worth more than £2 million, according to the latest estimates by Knight Frank, a property consultancy. This tax could be supported by Nick Clegg, the leader Liberal Democrats.

In this sense, homeowners whose properties are valuated below £2 million fear that their properties will be reclassified and, by consequence, they will be in the scope of the new tax. On average, the new tax will obtain £36,000 per property in revenues and the total amount of revenues will be above £2 billion.

Real estate consultants and experts think that the ‘Mansion tax’ does not burst the housing bubble. In addition, there is an important technique problem, since the elaboration of the census has a high cost. According to the head of research of Hometrack, Richard Donnell, the cost of this survey could be larger than £2,000 for a house valuated at £2 million.

Such initiatives are widespread throughout Europe. Governments consider taxes on high-wealth are necessary to reallocate the wealth. However, these taxes actually destroy wealth, disincentive capital accumulation and hurt saving, particularly for the middle class. In spite of being these measures focused on ‘rich people’, the middle class is always affected.

Originally published by The Luxonomist “New Tax on Luxury Properties in UK?”


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Javier Santacruz Cano

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