Paul Engelbrecht Commercial Property Solicitor at Hughes Paddison Solicitors, Cheltenham, Gloucestershire advises that the concept behind a so called “Mansion Tax” on all homes worth more than £2,000,000 is unfair and ill conceived! The Treasury revealed yesterday that 55,000 properties would be subject to the tax and that homeowners could expect to be hit with a bill of up to £36,000.
A 'mansion tax' could financially cripple many property owners, as it would not exclusively target the super-rich, as its proponents claim. It would trap those whose home has increased in value over a considerable period of time - those people who could be dubbed 'asset rich, cash poor'. That could, for example, be a cash-poor pensioner who's been living for many years in an area of London where house prices have sky-rocketed over the decades and then becomes liable simply as a result of the value of the property that person purchased several years ago for a more modest price.
Just because someone's home might now be valued at £2,000,000, it does not automatically mean that they have £36,000 each year in disposable income to be able to afford to discharge this tax. Home owners could be forced out of the homes they have spent most of their lives in or forced to take on huge debts.
This policy, in effect, does not simply tax the wealthy, but punishes people whose home has grown in theoretical value during their ownership. I say 'theoretical' because, of course, it's not worth that, until someone actually buys it for that price.
Due to its very nature of basing the bill on a single property value, instead of taking into account the investment history, mortgages, and second homes for instance, the mansion tax is weak at deciphering who should be considered 'wealthy'. This is purely a tax on property owners, not on assets generally. Why is someone who has a £2,000,000 home deemed richer than someone who owns other assets of the same value?
In short, this is an unfair and ill-conceived tax which targets certain groups of people's post-tax cash to fill the public purse and represents a new low in the UK's tax system For more information on Property matters please contact Paul Engelbrecht on 01242 586868 or firstname.lastname@example.org for a no obligation, free of charge, initial discussion.