A press release from one of the biggest property web sites issued this morning illustrates just how easy it can be for commentators to get the wrong end of the stick at times like this. The note claimed to identify one of the most difficult numbers to get hold of in this General Election – not how many Labour and Tory MP’s have read Nick Cleggs manifesto but exactly how many homes are worth over £2m?
The Liberal Democrats are proposing a so called ‘Mansion Tax’ which was first launched at their party conference last summer when it was to be a levy of 0.5% on homes worth over £1m. The party subsequently rowed back later in the year announcing that the tax would now be 1% applying to properties over £2m.
Many people have tried to estimate the number of homes that might be caught and this particular web site have enthusiastically joined the sweep stake boasting that they calculate from their database of over 10m records that there will be 38,500. They go on to state that “The average homeowner hit with this tax would pay an additional £32,270 in tax per year, with those at the threshold paying £20,000 and more expensive homes hit much harder”.
In fact the average tax due would be a rather more modest £12,270.
I presume that they have calculated this by taking 1% of the value of each home which is why they think that those at the threshold will pay £20k. However, a quick check of page 15 of the Lib Dem manifesto shows that their policy is actually one of “Introducing a Mansion Tax at a rate of 1 per cent on properties worth over £2 million, paid on the value of the property above that level.”!
In fact, the Valuation office are the only official organisation who might know the answer to the question of how many homes there are over £2m but even then it would take considerable effort to answer fully. Leasehold properties in London are often worth less than their freehold value for example and is an farmhouse worth more than the threshold just because it has land?
Band H, the highest council tax band for homes over £320,000 applies to just 127,000 properties in England, 57,000 in London but these values were calculated for 1991. House prices across the country have more than doubled since then of course and I believe that there are around 80,000 properties worth over £2m today. A Liberal Democrat win may be hard for many to comprehend but at least the Mansion tax impact on those who own these type of homes won’t be quite as dramatic if Messrs Clegg & Cable win on 7th May as some commentators have rushed to suggest.