Newsletter | May 2010 | Lib Dem ‘Mansion tax’ doesn’t add up!

One feature of the Liberal Democrat manifesto that has so far had little airtime and that sets them apart from the other parties is their plan for a so called ‘Mansion Tax’. When first suggested in the summer of last year at their party conference, the plan was to levy a charge every year of 0.5% of the value of any residential property worth over £1m. Vince Cable, the bookies’ favourite to be the next Chancellor, rowed back later in the year when he raised the rate to 1% and the threshold to £2m.

At the time, the tax was anticipated to raise around £1.4bn or roughly half the amount raised last year in Stamp Duty Land Tax from house purchases. The proposal, if it were to see the light of day, is thought to take in roughly 35,000 properties, of which about 90% are in London and the South East. 

The Liberal Democrats had hoped to raise £1.7bn from the Mansion tax when they first announced it last summer but we now learn from their manifesto that it is only charged on the amount above £2m and as a result the likely take will actually fall below £1bn. It was famously said “a billion here and a billion there and it starts to add up” but I can’t see how this tax could even be computed. The Valuation Office is the only Statutory body who might be expected to calculate who should be taxed but how will they view a long leasehold property for instance? On the basis of its freehold value?

Not all those who live in homes worth over £2m are top rate tax payers but the vast majority will be, meaning that at the very least, those facing the charge will be paying out of taxed income, which will have cost them another 50% to earn. Less of a ‘Robin Hood tax’ then - more perhaps what Fred Goodwin described as a ‘drive by shooting’! 

Nick Clegg may have done more for his party in this election than any of his recent predecessors but his ‘wealth redistribution plan’ is hardly something that he can claim is fair. A word that incidentally appears 40 times in his manifesto.


Lucy Morton. 
Managing Partner