Mansion Tax risks becoming mainstream property tax
Tax expert Mark Cunningham has called for the Mansion Tax threshold to rise with the rate of inflation or risk becoming mainstream.
The Mansion Tax could be ‘fiscal dragged’ into becoming another mainstream property tax, an expert claims.
The Mansion Tax is due to be introduced in April 2028, adding an extra Council Tax charge on homes worth above £2million.
But there are already rumours that the threshold could be lowered to £1.5million, which would hit more homeowners and potentially cause more uncertainty for the housing market.
A (threshold) reduction would capture significantly more of the property market, and this would only increase as fiscal drag comes into play.”
More details could be released in Chancellor John Healey’s first Budget next week, but Mark Cunningham (pictured), a Partner at tax and business advisory firm Blick Rothenberg warns that there is a clear potential for fiscal drag to ‘silently’ bring more and more properties into the Mansion Tax net over time.
This is caused by the thresholds staying the same while house prices rise.
Cunningham suggests that this could be addressed by ensuring that the value thresholds are increased to take account of inflation.
Otherwise, he warns that the Mansion Tax could start to become less of a tax on exceptional properties and more like part of the mainstream property tax system.
Exceptional concerns
He says: “The Government is reported to be considering reducing the Mansion Tax threshold from the originally proposed £2million to £1.5million.
“A reduction would capture significantly more of the property market, and this would only increase as fiscal drag comes into play.”
“Properties are currently expected to be revalued every five years, while the charges themselves will increase in line with Consumer Prices Index (CPI) each year.
“However, there is no automatic indexation of the property value thresholds. Instead, the Government has said that decisions on whether to uprate the bands will be taken alongside each revaluation and therefore left to future governments.”
“Once the Government has established the infrastructure to regularly identify and value higher value properties, adjusting the thresholds or rates in future also becomes much easier.”
