This report presents Cebr’s analysis of the Labour Party’s proposed mansion tax on family homes in the
UK. The proposed tax would apply to UK residential properties valued at over £2m and would be in the
form of an annual fee. In recent discussion of the proposed mansion tax, it has been suggested that
when the tax is first introduced (most likely in 2016) all UK homes valued over the set threshold will be
subject to a payment. The size of the payment will be progressive, meaning that the tax amount will be
higher for owners of properties with greater values.
The most recent mansion tax proposal suggests that properties valued £2m-£3m will be subject to a
£3,000 annual payment, while the payment amount for properties valued above £3m will be based on
the value bracket they fall within.
The proposed mansion tax includes payment deferment for low income individuals - a measure meant to
safeguard cash poor residents of high-value properties many of which are pensioners. However, this may
make certain homes unsellable as households try to avoid making a back-dated mansion tax payment at
the time of sale.
The Labour Party’s proposal is a variation on the Liberal Democrat’s 2009 mansion tax proposal which
suggested a charge be levied on properties worth over £2m with increasing tax amounts for the £5m-
£10m, £10m-£20m, and £20m or more value bands. While not identical, both proposals aim to raise
revenue by taxing owners of high value properties.
Regardless of the finer details of the mansion tax, the overall policy comes on top of already increasing
taxes on family homes in the UK. Strong price growth has dragged an increasing number of properties
into the higher stamp duty brackets, making home ownership less affordable for many.
In order to gauge the extent of the proposed policy’s economic impact, Cebr has generated ‘nowcast’
estimates of current property values. This entails the utilization of Land Registry’s detailed “price paid”
data, which tracks information on residential property sales in England and Wales. The price paid data
was then uprated using information on local level house price inflation and Cebr’s house price forecasts.
This has allowed us to estimate the number of UK homes that would be subject to the mansion tax in
In addition to considering the economic impact of the mansion tax at the time of its introduction, the
report also studies how the number, location, and type of homes subject to the tax evolve in the years
up to 2020. It has been proposed that the £2m property value threshold in 2016 will increase at the
same rate as high-value properties in the UK. However, this will not necessarily prevent additional family
homes from being dragged up into the “mansion” category. The report then studies the broader issue of
family home taxation and other issues relating to the proposed mansion tax.
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