London, UK (PRWEB UK) 2 September 2013
The first detailed assessment of the proposed Mansion Tax reveals that its revenue targets will not be met at the current proposal for a £2m threshold.
The research by Knight Frank concludes that the proposed threshold and tax rate would deliver a gross annual receipt of £1.3bn, 24% below the Liberal Democrat estimate of £1.7bn and 35% below Labour’s £2bn estimate. This represents an average annual payment of £23,595 per property.
The research concludes that in order to raise the targeted revenue, the value threshold for the tax would need to be reduced from £2m to either £1.5m (to raise £1.7bn) or £1.25m (to raise £2bn). This figure could be even lower once exemptions and the cost of collection are factored in.
The tax would be levied overwhelmingly on London and the South East of England, with 86.4% of all £2m+ properties located in those two regions.
One in ten of all £2m+ “mansions” are one or two bedroom flats.
Assuming historic rates of property price growth, the number of properties affected by the tax will increase from 55,000 homes – currently worth £2m – to 775,500 over the course of the next 25 years.
Liam Bailey, Head of Research at Knight Frank, said: “Our calculations point to the real threat of the mansion tax threshold being lowered substantially in order to meet the revenue targets of the political parties.
“Even if the threshold is not lowered, it seems a fair assumption – given that it has remained at £2m since 2009 - that it would not be raised in line with future house price inflation thereby substantially increasing the number of properties affected by the tax.
“Over the past 10 years house prices have risen by 69%. Assuming a similar rate of growth in the future, all houses worth more than £1.2m today would be paying a mansion tax 10 years from now, meaning that the number of homes covered would nearly triple from 55,000 to 157,300. “