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Before the budget was formally announced by chancellor Rishi Sunak, there were whispers of Boris Johnson pushing a mansion tax for higher-priced properties in order to fund the government’s priorities of NHS, social care, and climate change.
Ultimately, PM Boris Johnson scrapped the tax before it could make it into the final Budget, but what could a mansion tax do to the housing market?
What is the mansion tax?
The so-called mansion tax is actually a bit misleading as the tax would not only affect mansions but any higher-priced home. When a previous version of this tax was being considered in 2015, the tax took the form of an annual levy on homes worth more than £2m.
If a tax were to be instituted in this form, it would disproportionately affect properties in London and the South East — one of the main arguments against this tax then, as well as now.
It might escape lawmakers that just because a flat or home where someone resides has increased in value over the years does not mean that the occupant has the means to pay additional tax. Plus, this does nothing to alleviate the burden of stamp duty, and in fact, would impact the portion of the public that already pays a massive amount of stamp duty. Property in the South East is expensive so it stands to reason that a healthy portion of stamp duty is collected from the region.
Effect on the property market
The market has remained largely flat for the past year, but after the election and Brexit, public sentiment was looking up. A mansion tax would halt any progress experts might hope for, not just in the current climate, but in the foreseeable future.
A mansion tax would effectively stop any progress the property market in the capital managed to make which would have a knock-on effect on the rest of the country.
Luckily, for the time being, no such tax was presented as part of the Budget 2020 statement and the PM and chancellor decided to pursue other avenues to raise funds for their priority projects and level the playing field between all the regions in the country.
However, with the current COVID-19 pandemic, the budget has gone out the window since it was announced on 11th March so it is possible that the mansion tax will resurface again at a later date.
Safeguard your future
To protect against any potential moves like this that may arise from the government, work with an adviser to ensure your financial portfolio is diversified and protected as much as it can be. Get in touch with one of our experts today.