… in yesterday's Evening Standard, a fine, rich seam of KLN's…
Labour's 'unfair' mansion tax will hit five London boroughs hardest, but palatial country homes under £2m would be exempt
That's because the tax is actually a tax on homes worth more than £2 million, and not a tax on "palatial homes". Most of those homes are in certain London boroughs. Why this makes the tax and more or less unfair than if they were scattered more evenly around the country is never made clear.
Richard Barber, partner at central London estate agency, W.A.Ellis, said: “A middle-income 30-something who purchased a family home for £900,000 eight years ago in an ordinary Fulham or Wandsworth street of terraced houses, that house may well now have a price tag in excess of £2 million.
Yes, and like all middle-income 30-somethings, he had no problems rustling up a the deposit and meeting the mortgage repayments on a £900,000 house. Maybe his wife's got a part-time job as well, or something? That £1.1 million windfall, tax-free capital gain doesn't even come into it, don't all middle-income 30-somethings expect the odd bit of good luck like that?
The Knight Frank study also showed how rapidly rising prices in London have dragged increasing numbers of homes into the mansion tax bracket. For example a home in Islington valued at £1.3 million in November 2009 will now be liable.
Yes, that's because it's potential selling price has gone up by £700,000 and is now over the threshold.
Liam Bailey, head of residential research at Knight Frank, said a new Labour government would need to tread cautiously as a draconian mansion tax could start to hit the wider market in London and beyond.
He said: “My guess is that they won’t be able to push the tax too high because that will start to damage values and affect income from stamp duty, inheritance tax and capital gains tax.”
Aha, so the tax will reduce SDLT revenues, will it? That's a Killer Argument Against, is it? See below.
… Trevor Abrahmsohn, managing director of estate agents Glentree International, said: “[The Poor Widow In A Mansion] is likely to be asset rich but income poor but will be planning to pass on her wealth to her family. Under Mr Balls proposal whatever is left after the accumulation of mansion tax is extracted will then be hit by inheritance tax. There will be nothing left.”
Ed Balls intends to extend the ATED to all housing, whoever owns it, so the tax on a home with a current selling price of £2 - £5 million will be £14,000 a year. So let's start with a home worth £3 million and assume the Poor Widow lives another thirty years, so when she dies, the deferred tax payable will be £420,000, leaving £2,560,000 liable to inheritance tax = £772,000 (assume she can use her late husband's nil rate band), so her family gets £1,808,000.
Seeing as the Poor Widow only paid a few shillings for the house and has lived there rent and tax free for most of her life, that's still an excellent return on her paltry investment, and looks like a damn' sight more than "nothing" to me.
The equal and opposite Killer Arguments were presented in the readers' letters (30 June, page 53):
NO ONE in their right minds would accept Ed Ball's mansion tax deferment regime if they couldn't afford to pay.
The reality is that they would have to move and trade down, providing a further windfall to HMRC as 4% stamp duty becomes payable, which no doubt Mr Balls has calculated already.
James Owen
No, they wouldn't "have to move", that's an outright lie, it's optional, he just said so himself.
But can the Homeys get their stories straight:
a) Would the Mansion Tax reduce or increase Stamp Duty Land Tax revenues? And if so, which is a good thing and which is a bad thing?
b) If rolling up and deferring leaves the heirs with "nothing" (another outright lie, but run with it), is so terrible, what's wrong with a one-off 4% (or more likely, 3%) hit on the new smaller place the Poor Widow buys, enabling her to pass the rest of the unearned and untaxed multi-million £ gain to her heirs right now, Inheritance Tax-free? And her new home will easily be below the Inheritance Tax threshold as well, job done, sorted, all for a one-off payment of under £15,000.
Debate Magazine
