The UK considers introducing a mansion tax which will target the properties that are worth more than £2 million. The owners of such properties will be obliged to pay an annual progressive tax starting from 1% of the property value.
The mansion tax regime was proposed by two UK political parties, namely, the Labor Party and the Liberal Democrats. Although the current mansion tax proposal receives a lot of media attention, the idea of such a tax in the UK is not new. For the first time, the concept of mansion tax was introduced in 2009.
The proponents of mansion tax claim that the adoption of the new tax would help to raise revenue and decrease wealth inequality. The opponents of the proposed tax stress that it may carry significant economic risks, including (1) harming UK investor-friendly reputation, (2) encouraging professionals to move outside large cities where real estate prices are high, (3) preventing high-net-worth individuals from doing business in England, and (4) slowing down the market of building new houses.
At present, in the UK, there are about 91.000 (81% of them in London) properties which are valued above the threshold of £2 million. The properties range from small one-bedroom flats in Kensington area to multi-bedroom provincial houses. According to preliminary calculations, the proposed mansion tax would contribute to the UK budget with around £1.2 billion a year.