The UK’s property-rich hotspots have hit the headlines this week – and so too has the idea of a mansion tax on million-pound homes. Is it right to charge the ‘millionaire rows’ of Bucks and Surrey a property premium?
If you live in Beaconsfield in Buckinghamshire, or Virginia Water in Surrey, you might find yourself part of a property-rich minority. Apparently, these towns have the highest proportion of homes on sale for £1 million or more in the country.
Despite falling property values around the UK, these towns, located on the capital’s commuter belt, are thriving. Around 46% of properties in Beaconsfield are on sale for £1 million or more, while 25% of these ‘millionaire rows’ can be found in Surrey. Compare that to London, where only 13% of homes are up for £1 million.
The news couldn’t come at a more prescient time. With the Liberal Democrats currently holding their annual conference in Birmingham, the idea of introducing a ‘mansion tax’ on high-valued properties is back on the agenda.
Taxing million-pound pads
Over the past few weeks, debate has raged around whether or not the additional 50% tax rate – which is levied on earnings over £150,000 – has been working.
A letter written to the Financial Times at the beginning of September, and signed by 20 of Britain’s leading economists, called the 50% tax rate a ‘self-defeating way for the Treasury to raise the money and a reduction in tax avoidance would be more effective.’
Business secretary Dr Vince Cable suggested this week that he might be in favour of replacing the 50% additional rate tax with a ‘mansion tax’. The idea was first mooted in 2009, and would see homeowners with properties valued over £1 million paying 0.5% of its value to the Treasury annually. This would not only be applied to residential houses, but commercial properties too.
Pensioners might be punished
Personally, I’m not sure about this. Many people have eschewed pensions over the years, relying on the value of their home to provide them an income when they finally retire. So those who’ve seen the value of their home rocket, despite perhaps not having a high income, may choose to downsize on retirement and use some of the proceeds to buy an income for later life.
A tax of this kind might see these people having less to live on in their older years. At least with the 50% tax rate, you’re generating revenue from those who already have a sufficient income for a comfortable life.
What do you think? Should the denizens of Buckinghamshire and Surrey be forced to pay at least £5,000 a year to the Treasury because their house is worth a fortune? Do you want to see the 50% tax rate abolished?