Fiddling with the mansion tax is bad news for the housing market

Become an Independent member to bookmark this article Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Membership today. Join today Already a member? Log in A t a business gathering this week, there were conflicting views about the chancellor, John Healey . Nothing unique about that, you might say – we all have differing opinions of leading politicians. Except these were folks who tend to speak with one voice. Most people at the top of the private sector are from the centre or right. That’s not to say they are instinctively opposed to a Labour chancellor, but they wish to feel understood, to be listened to – and be treated as drivers of economic growth rather than a cash cow to be milked. Some consider Healey sensible. They believe he is reasonable, not out to clobber them. Others are less convinced – they see him as playing his cards close to his chest, a man who so far has not veered from the Rachel Reeves playbook. He’s made soothing noises as she did, but as with her first Budget , he may spring an unwelcome surprise . Is he taxing banks or isn’t he? One minute Healey is bigging up the City and financial services, so that would suggest not; the next, we’re being told he is minded to hit the UK lenders. Apparently, the foreigners may escape, in the belief that will soothe overseas investors’ nerves. Possibly, but it still sends a signal that Labour regards big business as fair game and suggests a direction of travel to be revisited at a later date. We’re similarly informed that Labour is going to target homes worth £1.5m-plus with a mansion tax, then we’re assured the plan has been shelved. Either the first was idle speculation or Healey and his advisers really were contemplating such a move, only to scrap it. In which case, they need to make up their minds – time is running out, with less than two weeks before the Budget. Recommended Racists in Reform? They’re not a bug, they’re a feature Negative equity is here and a collapse in the housing market has already begun The seven questions Andy Burnham needs to answer if he’s serious about rejoining Europe It plays to the persistent feeling that Labour regards a person’s house, just as they do the profits of enterprise, as something to be attacked. Scratch the polished veneer and underneath they’re hardcore Marxists really, for whom all property is theft – that sort of thing. Healey was said to be on the verge of extending the Reeves council tax surcharge on homes in the £2m-plus bracket. He wished to lower the threshold by £500,000. His predecessor’s mansion tax will hit owners of homes worth between £2m and £2.5m with a £2,500 annual charge, which rises to £7,500 for homes worth £5m or more. The Reeves measure comes into force from April 2028. Healey – it was reported and then denied – would drop the limit to £1.5m and snare more residences in his fiscal net. When they take soundings and analyse the figures, his mandarins presumably would observe that homeowners are not stupid. If they set a bar beyond which a home qualifies for a higher tax charge, owners will do what they can to fall below. Most people don’t like paying tax – which may seem basic, but it never fails to amaze how few Labour ideologues fail to grasp this premise. That means they will do their level best to avoid paying. Research has found that house sellers have been trying to keep their homes below £2m to escape tax ( Getty ) So, it should be no surprise that research by Hamptons earlier this year found that house sellers were keeping or pushing their homes below £2m to escape the Reeves tax or to give its correct title, the high-value council tax surcharge or HVCTS. They noticed that after she introduced the HVCTS, there was a surge in offers on homes under £2m. Some 83 per cent of offers for homes around this value stayed below £2m since her budget announcement, compared to 64 per cent a year earlier – meaning the new tax is already slowing down the market before it’s even been introduced. Confirmation came from the chart for £1m homes staying comparatively flat – that’s because buyers had no tax incentive to force a reduction, because at that price the HVCTS was not an issue. Hamptons said their analysis showed that homeowners are opting to push their houses below the surcharge threshold, rather than simply sticking to a value that could incur the levy. David Fell, lead analyst at Hamptons, told the FT : “If owners were primarily trying to offload properties that might incur the new tax liability, we would expect listing numbers just above £2m to rise. “Instead, the decline suggests that some sellers are adjusting asking prices downwards to ensure their properties fall below the threshold where demand now appears strongest.” For Healey, it might have been tempting to head lower to catch more, and gain greater income. Dropping the threshold by 25 per cent might not seem so severe, but a far higher number of homes would attract the charge. Dropping to £1.5m would have resulted in the number of homes paying the mansion tax jumping from around 127,000 to 243,000, according to research from Tax Policy Associates. Recommended A windfall tax on the banks could hit us all A piddling 0.1 per cent growth? British industry is rejoicing – here’s why Are the Tories enjoying a ‘Badenoch bounce’ in the polls? In London and the South East, where prices are highest, the properties paying the Healey £1.5m HVCTS, as opposed to the Reeves £2m version, would have tripled in some areas. That’s why it turns out that Reeves was herself dissuaded from £1.5m and settled on £2m, after lobbying by Labour MPs across the region. They impressed upon her that in their constituencies a £1.5m property was not a ‘mansion’ – elsewhere in the country, yes, but not where they were. Think again, John, which is seemingly what he did as well. Or not. Soon, we will know for sure and be able to form a clearer picture of John Healey .