On picking up the paper yesterday morning you quite probably encountered some discussions about the proposed ‘mansion tax’. The proposals are fronted by Ed Milliband, leader of the Labour party, and include a multitude of ideas which are all intended to plug some of the government’s budget deficit. Inevitably, those who store their wealth in property – that’s landlords – are going to be some of the worst hit.
What has been proposed?
At the moment, the talk is more political than anything else, with little hard economic content, but a popular idea is a flat rate levy on properties worth over £2m. If introduced, the rate will be around 1-2% and would cost the proprietor of a £2m property around £20,000. It is unclear whether this would apply only to single properties with high value or whether landlords with properties totalling a value of over £2m would be affected. Equally, little thought has been applied to whether costs like landlord insurance premiums or service charges could be deducted from the property value, given a smaller tax charge.
How does this affect landlords?
At present, it doesn’t affect anybody – though the Liberal Democrats are pressuring the Government to enforce such a tax, it all rests on the shoulders of the Chancellor at the budget meeting later this month. If he decides to bring such a tax into law, the proposals will have to be considerably clearer. However, alongside these proposals, there is pressure to get the rental property market going again, and it might be that landlords qualify for an exemption on this tax.
All is very unclear at the moment and both Ed Milliband and the Shadow Chancellor have a lot of work to do if they wish to enforce such a tax-starting with winning the 2015 General Election! As a landlord, it’s worth keeping in touch with the situation but there’s no need to worry just yet – it’s likely that the budget will be very positive for landlords this year.