The newly announced mansion tax will do little but impact London’s housing market. Its effect will be more pronounced here than in any other part of the United Kingdom. The recent Budget unveiled by the government introduces a tax on homes valued over £2 million, affecting over 100,000 households across England. London, as home to the greatest concentration of these high-value properties, will be hit hardest by this reframing of the financial picture.
Properties worth more than £2 million will soon face a £2,500 yearly fee under the stricter guidelines. Properties over £5 million would incur an additional £7,500 tax, in addition to their normal council tax. Around 70% of all dwellings valued above £2 million are found in London. The capital’s residents will bear a considerable part of Thun’s new tax burden.
London’s mayor, Sir Sadiq Khan, has been vociferously alarmed at the prospect of the impact on asset-rich but cash-poor residents. Many individuals and families may find themselves with valuable properties but limited liquid resources to cover the new financial obligations. The mayor’s concerns indicate a new mood among the London public coming under increasing pressure from the cost of living crisis.
The tax band changes won’t go into effect until 2028. That’s about when we hope to finish the county-wide revaluation as well. This additional delay will give at least some affected homeowners more time to get ready for the fiscal ramifications of the new tax environment.
London alone has more than 68,000 homes in the highest property tax bracket, band H. These homes are worth £320,000+! The next highest concentration is not such a surprise – the City of Westminster has the most properties worth over £2 million, with a total of 17,272 homes. Kensington and Chelsea not far behind with 15,520 of these properties.
The Budget further laid out initiatives to boost local economies. Mayor Khan hopes to raise some £250 million a year from a new mayoral-controlled tourist tax. This revenue is dedicated to improving local infrastructure and making the tourist experience in the capital better, too.
“improve the tourist experience” – Sir Sadiq Khan
Somewhat surprisingly, not everyone is happy with the new measures. Adam Hug, leader of Westminster City Council, has urged that revenue from the mansion tax should be shared with local councils rather than being retained solely by mayors. This recommendation speaks to greater inequitable distribution of funds that have the potential to positively impact every facet of a local community.
The hospitality industry has already voiced its dismay at the impact the Budget could have on future trades. Michael Kill, chief executive of the Night Time Industries Association, characterized the Budget as a “hammer blow to the already fragile night-time economy.” Retail and leisure businesses will now have to adapt to new permanently lower tax rates. These cuts will be offensively financed by increasing tax rates on all properties worth £500,000+.
All these changes together will transform the face of London’s economy in the coming years. The Budget presentation further underscored these with a focus on short-term wins. A fares freeze was promised to public transport users, giving breathing room to the vast majority of commuters.
“More immediate is the fares freeze that was announced on Sunday.” – [source: BBC]
Even with these actions, there are still big questions about whether the Budget goes far enough to meet long-deferred infrastructure needs. According to reports, the chancellor’s plan fails to fully fund any of the big-ticket projects. Most surprisingly of all, the Bakerloo line extension and the West London Orbital are both missing.
“The chancellor’s Budget does not include funding for the Bakerloo line extension or the West London Orbital.” – [source: BBC]