How much will mansion tax cost us before it makes anything?

Disputes about valuations will take up time and money

Updated: 
Britain Election Labour Party

The mansion tax is supposed to transfer money from the wealthy to the state, but it may cost taxpayers millions first.

If Labour or the Liberal Democrats, or any type of multi-coloured government with one of the these parties in, comes to power then we'll very likely see a mansion tax brought in for homes worth £2 million or more.

However, it won't be a case of taking a spot at number 10 and asking everyone to write you a cheque for £3,000 – the amount those with properties worth between £2 million and £3 million are expected to pay. Those with more expensive properties will pay more.

People who own £2 million homes, on the whole, aren't short of a bob or two (and yes, I appreciate there are exceptions that mostly centre around little old ladies who have lived in London town houses their entire lives).

The point is these people aren't going to take a mansion tax lying down and if their property is around the £2 million mark they are expected to challenge the valuation their local council puts on their home.

If there's a challenge it has to be looked into and figures from Savills show that taxpayers could have to foot a bill for as much as £175 million as HM Revenue & Customs will be forced to pay for the cost of disputes.

The way the law works at the moment with regards to inheritance tax and capital gains tax disputes, HMRC covers the cost of the valuation and the valuation dispute procedure. There's no financial risk for homeowners in disputing the cost of their home so why not go for it.

Complex system

I'm not adverse to taking money off the wealthy but I am adverse to complicated tax systems that are difficult to administer, costly for the taxpayer at the outset, and therefore may not be as lucrative as first calculated.

Labour leader Ed Miliband has said that a mansion tax would bring in £1.2 billion a year that will be used to fund the NHS. But what happens when house prices move and people fall below the £2 million mark, or others rise above it? Will we be sending armies of valuers out every time the Halifax house price index is out?

The mansion tax seems like a good way to take money from the wealthy but I'm not convinced it's going to be as easy to get that money as Miliband thinks it is.

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