Labour’s determination to destroy the property market continues apace, with the latest calculations showing the negative consequences of their mansion tax policy.
I wrote here about the woefully negative consequences of their new Renters' Rights Bill, which came into effect last week.
Aimed at ‘helping renters’, it’s seen an exodus of Landlords, fewer rental properties available, the highest rents in history, and landlords deciding not to take chances on tenants with less than perfect credit.
“Hold my (overpriced) beer” appears to be the reaction of Labour’s policymakers on home ownership as the full consequences of their ridiculous mansion tax policy are now laid bare, with Treasury estimates predicting it could cost the best part of £400million before it raises one solitary penny.
As a reminder to those of you who may have missed this latest example of economic mismanagement, last year Rachel Reeves announced in her budget that all homes valued at over £2million would be subject to an additional annual levy from April 2028.
As is always the case with this Government, the reasons for the tax remain unclear, but it clearly prioritises righteousness over consequences.
The Government no longer seems to care if a policy actually works or not, or has the desired effect; all that matters is looking good to those who scream loudest in their own party, or worse, on X.
And let’s not forget this wasn’t a policy given one mention in their manifesto. In fact, Rachel Reeves denied any sort of ‘mansion tax’, or an increase in capital gains tax, in August 2023. Both those promises have now been broken.
More expensive properties, like those valued at over £2million, are already subject to higher council tax. These properties don’t use more council services, yet they still pay more based on their value. They’re now being expected to pay even more still.
The purchase of properties over £2million is subject to far higher stamp duty. The very minimum you’d pay on a residential home at that value or above is £153,750.
That’s money direct to the treasury for doing pretty much nothing. And it’s no small amount. Yet now owners of these properties are expected to pay even more on top of that huge amount.
Many of these homes will have mortgages. Some could have mortgages for up to 90 per cent of their value. This tax, as awful as it is, would make far more sense if it were levied against £2million worth of equity in a home, as opposed to its whole value. How is it fair that someone pays a tax on the whole value of something they don’t fully own?
Homes in the South of Britain tend to cost much more than those in the North. Those buyers have already paid a premium for a home which could be cheaper just a few miles further up the M1. Why are they paying extra again? Isn’t that discriminatory?
With the rental market destroyed, Labour is now taking a blowtorch to homeownership - Cristo Foufas
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The above demonstrates how those people who own more expensive homes already pay their fair share. Sadly, though, Rachel Reeves doesn’t appear to think that’s enough.
And it’s doubtful even the latest development - which shows just how financially illiterate this policy really is - will make any sort of difference to her.
By the treasury’s own figures, it’s estimated a mansion tax could cost £380million before it raises a single penny.
This is due to the prediction that stamp duty and inheritance tax receipts could fall by a staggering £240million between now and April 2028 due to buyers simply avoiding purchasing properties anywhere near the £2million threshold.
They wisely don’t wish to buy a home that expensive, which comes with an added cost for nothing, meaning the value of those homes is falling.
Add to that the £120million it’s set to cost to identify and evaluate homes which are near the £2million threshold, that’s the best part of a £400million cost to the taxpayer before any money is raised. How can this possibly be seen as a good thing?
For a government so keen to use the housing analogy of ‘Fixing the Foundations' to describe their handling of the economy, you’d be forgiven for thinking this policy is proof of another economic policy displaying substandard foundations, unable to prop up the most basic of structures. I wonder if the same analogy could be applied to those Labour MPs still propping up Keir Starmer?
What’s even more frustrating about this policy is the wider consequences. We have a Government that seems to have forgotten that people moving house, buying expensive properties or adding value to their properties, is a brilliant thing for the wider economy.
This policy is making buyers want to do the precise opposite.
As mentioned, rather than buy a more expensive property, buyers are now going for cheaper ones, meaning less stamp duty is raised.
So the treasury loses out. It’s estimated by Hamptons that in the two months after this policy was announced, the number of homes coming to market priced between £1.8 and £2million rose by six per cent year on year, while listings between £2 and £2.2million fell by seven per cent.
That’s a lot of stamp duty gone, so the treasury is directly losing out.
But we now also have the perverse situation that buyers, or indeed those who already own their homes, are being more cautious about wanting to improve them.
The building industry is predicting that people who own homes over £1.5million are now unlikely to want to renovate or improve them as they fear it might add too much value to the home, meaning they end up in the mansion tax bracket.
People spending their money in this way is good for the economy. As well as builders getting paid, materials get bought, kitchens get fitted, appliances get purchased, department stores sell furniture, all meaning people get employed, and the government gets a healthy slice of VAT.
It’s quite staggering that we have leaders now stopping people from wanting to spend their money in this way, whilst simultaneously telling us how much they care about business.
But sadly, that’s where we are now. It’s ideology over practicality yet again, and if the wider economy suffers, or we all end up paying more taxes elsewhere to make up for it? So be it? At least they can be virtuous to the far-left voter base they’re desperate not to lose to the Green party.
It also says something about the mindset the UK finds itself in at present. We have leaders who’d rather implement envy taxes like this, instead of congratulating those who’ve worked hard enough to get a property which is of high value.
We used to encourage people like this. We used to want to pat people on the back who managed to improve themselves to the point where they had an expensive home. Now they’re viewed with suspicion and jealousy, with a Government desperate to get its sticky fingers on that wealth.
It’s a sad indictment of how far Britain has fallen and plays into the wider issue so many people face: work hard, do the right thing and accumulate some wealth, only to find yourself penalised and punished instead of energised and encouraged.
The one consolation right now is that the foundations of this socialist edifice look shakier than ever as voters head to the polls.
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