There’s heightened talk that the market could be hit with a Mansion Tax in next month’s Budget.
Specifically it’s thought Chancellor Rachel Reeves could impose a 1% levy on the proportion of a property’s value above £2 million.
If the idea goes ahead it’s likely to attract controversy, with many saying it won’t raise much cash and it could harm high value markets in London.
Knight Frank estimates that a £2 million mansion tax would only affect 0.54% of homes across England and Wales. In London’s Kensington and Chelsea that rises to 18.5% however.
Mervyn King, former Governor of the Bank of England, was critical of Reeves.
He said: “Property taxes are an interaction between stamp duty, council tax, capital gains tax, inheritance tax.
“You don’t solve that problem by just adding another wealth tax to it.”
He added that Reeves should look at “all aspects” of tax, not just on property, “to come up with a coherent view to what it should look like”.
Hilesh Chavda, partner at law firm Spencer West LLP, said: “The mansion tax proposal reflects a growing focus on wealth-based levies.
“While framed as a fairness measure, it risks creating uncertainty in the housing market and is likely deter investment or distort the market further.
“A more coherent approach would involve comprehensive property tax reform, such as rethinking SDLT and council tax, rather than isolated levies.”