The hidden costs of a Mansion Tax
There is something of a comfortable delusion regarding the proposed ‘Mansion Tax,’ a levy on the highest value properties put forward by a number of parties ahead of the election. At its heart, the delusion relies on the idea that it would only target the coffers of the stereotypical ‘filthy rich’ who can in theory easily afford the estimated levy. That might make it more palatable to voters, but the reality is that the consequences of this new policy would affect every single taxpayer in the country, regardless of the cost of their home.
According to a recent report compiled by Savills Estate Agents, the taxpayer could unintentionally be hit for a bill of as much as £65 million, as HMRC will be forced to pay for the cost of homeowners disputing the valuation of their property to ensure they are not subject to the tax. More than 120,000 households could face the prospect of revaluation, costing up to £4,800 each. HMRC – and therefore you and I – would have to cover the cost of both the valuation itself as well as the valuation dispute procedure, similar to Inheritance Tax and Capital Gains Tax disputes.
The cost of this process is thought in actual fact to be greater than the amount raised from homes worth between £2 million and £3 million under the levy. As our Research Director Alex Wild has written before, there are a number of serious questions regarding the workings of the Mansion Tax that reduce its credibility as a revenue raiser and create another unnecessary burden on taxpayers. Like ‘fiscal drag,’ the phenomenon in which more people are dragged into paying higher rates of tax by stationary thresholds, the potential costs of administering the Mansion Tax are another example of the unintended consequences of taxes which are invariably complex and inefficiencies.
Make no mistake – the Mansion Tax will clobber us all. Ultimately, we need to reduce and simplify taxes rather than expand on the complicated, arduous and punitive system that already exists.
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