Mansion tax

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Flats at Langham Mansions in Warwick Road, London SW5. Some expensive London properties may be flats in larger blocks.

A mansion tax is a common name for an annual property tax on high value homes, although the term itself is widely regarded as a misnomer.[1] The tax is only a proposal in the United Kingdom, but has proved very controversial and has received widespread media coverage. At present, the most commonly cited trigger point would be a property value of £2 million.

Original concept[edit]

In the United Kingdom, the concept of a mansion tax is widely attributed to Vince Cable.[2] In its original form, proposed in 2009,[3] Cable suggested that all properties valued at over £1million would be taxed annually. He raised the proposed threshold to £2m in January 2012.[3]

Budget 2012[edit]

In an accommodation with Coalition partners, the proposal was modified and a 7% rate of Stamp Duty Land Tax was levied on house sales over £2 million, following George Osborne's 2012 budget. In contrast to an annual "mansion tax", this one-off tax is only paid when a property is bought.

Liberal Party conference motion 2012[edit]

Support for the original proposal re-emerged at the Liberal Democrat 2012 conference.

The motion called for "an annual mansion tax on the excess value of residential properties over £2 million as a first step towards wealth taxation designed to reduce inequality". It was passed in a vote of over 200 delegates, with two against.[4]

Despite this, the Liberal Democrat's coalition government partner, the Conservatives, ruled out the introduction of a Mansion Tax; Chancellor of the Exchequer George Osborne said in October 2012: "We are not going to have a mansion tax, or a new tax that is a percentage value of people’s properties. Before the election they will call it a mansion tax, but people will wake up the day after the election and discover suddenly their more modest home has been labelled a mansion."[3]

Labour Party embrace concept[edit]

On 14 February 2013, the Labour Party leader Ed Miliband said that he would, if in government, introduce a mansion tax and then re-introduce a ten pence tax rate for low earners.[5] However, there was no commitment to put this policy into the Labour Party manifesto and there was also criticism of the fairness and practicality of the proposal.[6] However, Miliband reiterated this policy proposal at the 2014 Labour Party Conference and it is now a firm commitment. Labour claimed the policy would raise £1.2bn a year which would be used to fund the National Health Service.[7] Based on an estimated 100,000 homes valued over £2m, this means each property would be liable for an average bill of £12,000.[8]

On 20 October 2014 in response to widespread publicity about the proposal, the Shadow chancellor Ed Balls published further details. He confirmed properties valued between £2m and £3m would pay £3,000 per annum, but properties over £3m would pay considerably more.[9] Commentators have suggested that in order to raise the projected £1.2bn, the Mansion Tax payable on homes over £3m would have to be £28,000.[10]

Liberal Democrat Party moves away from Mansion Tax[edit]

In October 2014, the Liberal Democrats abandoned plans for a new tax on high value homes, opting instead for a change in the existing Council Tax system.[11] Nick Clegg, speaking on the BBC during the Liberal Democrat Party Conference 2014, said: "I went off, big time, the idea that you have a fixed levy as a percentage over a certain value. The more I looked at it, the more I thought, ‘That’s very crude.’ It leads to eye-watering amounts of tax being paid. What we should do is go with the grain of the council tax system and apply bands to higher properties."[3]

Autumn Statement 2014[edit]

On 3 December 2014 George Osborne announced changes to Stamp Duty. These measures included large increases in tax for more expensive houses. A buyer of a house at £2m would now have to pay £153,750 in Stamp Duty. In his speech he alluded to this being his alternative to Labour's Mansion Tax.[12]


Critics have said such a policy would hurt pensioners, as according to analysis by the think-tank the Centre for Policy Studies,[13] almost one third of all properties worth over £2 million have been in the same ownership for over ten years. The phrase 'mansion tax' is alleged by critics to be misnomer as 10% of properties in London valued at over £2million are in fact one or two bedroom flats.[14] A further issue is that a mansion tax could require an expensive and unpopular valuation exercise to be carried out, possibly in tandem with revisiting council tax bands.[15] The exact amount of tax that would be raised is also uncertain.

Labour review policy after election defeat[edit]

After Labour's May 2015 election defeat, Labour leadership candidates began to distance themselves from the policy. Andy Burnham said the mansion tax had been too “symbolic” and played into a public dislike of the “politics of envy”. Mary Creagh, another candidate for the leadership, said: “It alienated a whole bunch of people who said we were against them getting on and doing well.” [16]


The tax could be structured in a number of different ways. One possible variant is to limit the scope to non-resident, non-British owners of property. This would be intended to discourage foreign ownership of dwellings and free up housing stock for residents. Such a modification to the mansion tax has been suggested by Mark Field,[17] an MP in central London, where overseas ownership of property is commonplace. There are perceptions that the high cost of housing in London is in part due to a disproportionate amount of residential property being owned by non-resident, non-tax paying foreigners,[18] and that a modified mansion tax may alleviate this issue. Limiting the scope in this way would also limit the valuation exercise that the introduction of a mansion tax would require, as fewer properties would be impacted.

See also[edit]


  1. ^ "David Lammy stands firm on opposition to mansion tax despite Balls concessions". 2014-10-20. Retrieved 2016-02-22. 
  2. ^ "The UK is already taxed to death - a levy on wealth would be the last straw". Telegraph. Retrieved 2012-10-04. 
  3. ^ a b c d PrimeResi. "A potted history of the Mansion Tax". PrimeResi. Retrieved 2014-10-04. 
  4. ^ Hope, Christopher (2012-09-25). "Lib Dems demand £2m mansion tax for the 'stinking rich'". Telegraph. Retrieved 2012-10-04. 
  5. ^ "BBC News - Ed Miliband backs 'mansion tax' to fund 10p tax rate return". 2013-02-14. Retrieved 2013-09-21. 
  6. ^ "UK Mansion Tax: Report Reveals Full Impact". Forbes. Retrieved 2013-09-21. 
  7. ^ "Labour conference 2014: housing roundup". 25 September 2014. Retrieved 26 September 2014. 
  8. ^ "How would a mansion tax work?". BBC News. 2014-10-06. Retrieved 2016-02-22. 
  9. ^ Joe Murphy (2014-10-20). "Ed Balls: Mansion tax will cost homeowners £250 a month | Politics | News | London Evening Standard". Retrieved 2016-02-22. 
  10. ^ Simon Jenkins (2014-10-21). "Simon Jenkins: Ed Balls's sums don't add up — we must raise council tax | Comment | London Evening Standard". Retrieved 2016-02-22. 
  11. ^ PrimeResi. "Lib Dems abandon 'crude' mansion tax in favour of new Council Tax bands for high value homes". PrimeResi. Retrieved 2014-10-06. 
  12. ^ "Analysis: Osborne's political pitch". BBC News. 2014-12-03. Retrieved 2016-02-22. 
  13. ^ "Some questions on the Mansion Tax : A briefing note" (PDF). Retrieved 2013-09-21. 
  14. ^ Adam Uren (2013-09-03). "Mansion tax needs to hit £1.25m homes not £2m to meet target". This is Money. Retrieved 2013-09-21. 
  15. ^ "Mansion tax would require expensive revaluation". Retrieved 2013-09-21. 
  16. ^ Jim Pickard (2015-05-19). "Labour set to abandon mansion tax". Retrieved 2016-02-22. 
  17. ^ "Mark Field MP: The deeper discontent beneath the mansion tax debate". 2013-02-23. Retrieved 2013-09-21. 
  18. ^ Hammond, Ed (2013-08-03). "Foreigners buy nearly 75% of new homes in inner London". Retrieved 2013-09-21.