News

Mansion Tax is likely to be subject to continuing debate through to the General Election in May 2015.

A banded Mansion Tax known as the Annual Tax on Enveloped Dwellings (ATED) has been in existence since April 2013. As the name implies, this tax only affects residential homes that, effectively, are owned by companies. There are exemptions for residential properties used in a business, including where property is let.

Originally brought in as part of a variety of measures for homes worth above £2m , the ATED is to be extended to capture more properties by a staged lowering of the value threshold through to 2016/17.

By April 2016, houses worth £500,000 and above will be subject to the ATED, as below.

*Subject to inflation increases in line with the Consumer Price Index (CPI)

Post 2015 General Election

If there is anything other than a Conservative led government, it is likely that Mansion Tax style charges will be extended.

Whatever colour(s) the new government might be, the ATED regime as above is likely to be left in place for corporate ownership. In addition, both the Liberal Democrats and Labour seem to be suggesting a Mansion Tax policy that would extend the annual charge to individual owners.

The indications point towards an annual Mansion Tax for individuals only applying where a home is worth above £2m, giving some comfort to non corporate owners whose homes are worth between £0.5m and £1.999m.

Labour appear to suggest that three house value bands would be in play: £2m to £5m, £5m to £10m and a final band for properties in excess of £10m. The bands would not require annual valuation.

There is not yet any firm indication of the actual charge that will be applied at each rate band or the valuation date that would be relevant. For ATED, the applicable value date was 1st April 2012 with revaluation scheduled for 1st April 2017.

Labour has promised that concessions will be available to ensure fairness for asset rich, cash poor owners. These would include the ability to defer payment of the charge until a property was sold. Presumably such deferral would be secured by way of a legal charge.

Whichever way the country votes next May, tax charges on wealth that is tied up in high value property are unlikely to shrink away. There will be nervousness about the rate that will be applied, the date of the relevant valuation and whether the valuation thresholds will continue to be driven downwards.

Should you wish to discuss Mansion Tax or any other Taxes, our Tax Team would be delighted to hear from you.

The information contained within this document is believed to be correct but cannot be guaranteed. Opinions constitute our judgement as at the date shown and are subject to change.