TAXATION DEVELOPMENTS/DEVELOPMENTS IN TAXATION
Synopsis: At the Labour Conference this week, Shadow Chancellor Ed Balls reaffirmed Labour’s plans to introduce a mansion tax if they win the next general election. A series of other planned measures imposing taxes on the wealthiest families in a bid to raise funds for the NHS were also unveiled.
Date posted: Wednesday, September 24, 2014
In his speech at the Labour Conference this week Shadow Chancellor, Ed Balls, has reiterated Labour’s pledge to introduce a mansion tax. ‘We will levy a tax on the highest-value properties over £2m – a mansion tax. We’ll do it in a fair, sensible and proportionate way, raising the limit each year in line with average house prices and putting in place protections for those who are asset-rich and cash poor,’ he said.
If Labour wins the general election next year there will be four levels of mansion tax, which will be used to raise an estimated £1.7bn a year for the NHS. The lowest bands would be for homes valued at £2m-£5m and the highest for homes over £20m, mirroring the ‘annual tax on enveloped dwellings’ that already applies to high value residential properties bought through companies. The ‘asset rich, cash poor’ could be helped by allowing them to defer payment of the tax until they sell their property.
Other priorities for the ‘first Labour Budget’ would include:
Reinstatement of the 50p top rate of tax
Reinstatement of the 10p rate of tax for those on low incomes funded by abolition of the married couples’ tax allowance
A crackdown on ‘umbrella’ schemes used to employ temporary workers and a ‘closure of tax loopholes’ for hedge funds.
A tax on bankers to fund a Compulsory Jobs Guarantee for young people and long-term unemployed
An extension of the 1% cap child benefit rises until 2016-17
Removal of winter fuel allowance from the richest 5% of pensioners
Scrapping the coalition’s planned cut in corporation tax from 21% to 20%
Using the revenue that a mansion tax would raise gets Labour round the problem of how to increase NHS spending without a rise in general taxation. However, the proposals will undoubtedly lead to owners of high value homes considering measures, such as giving away a separate part of their property to reduce the overall value of their home to below £2m. Such measures, while an understandable reaction to the proposals, will have tax consequences and should not be implemented without due caution – particularly as nothing is guaranteed at this stage.
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