High Value Property Levy (Mansion Tax)
The High-Value Property Levy would add a modest, new, banded mansion tax through the council tax system for properties worth more than £2 million. Nobody in a home worth less than £2 million would be affected and the level of banding would increase each year in line with inflation. The banded approach is simple and could be introduced quickly after the 2015 election.
The levy will be separate from and paid in addition to council tax, and will be collected by local authorities alongside council tax, but be pooled nationally. The High-Value Property Levy will raise £1bn per year through a staggered charge on properties worth more than £2m, with the proposed bands and corresponding levy as follows: owners of homes worth between £2m and £2.5m will pay £2,000 a year; this would rise to £3,500 for properties worth £2.5m-£3m; £5,000 for properties worth £3m-£4m; and the charge would be set at £9,000 for properties worth £4m-£5m. A decision on how much to charge owners of properties worth more than £5m will be taken in a post-election budget.
We do not wish to cause unnecessary hardship to homeowners who will become liable to the charge but struggle financially to pay it, and that is why there will be protections for people on low incomes, such as allowing people to defer the charge and pay later on when their house is sold. Furthermore, anybody who thinks that their house has been unfairly valued will be able to appeal, just as they can already do with council tax.
The High-Value Property Levy is part of a package of measures we have set out in our manifesto to balance the books and create a fairer tax system that addresses the significant wealth and income inequality that currently exists in the UK. A responsible approach to tackling the deficit and our country's debts is essential because it underpins everything else we want to achieve. In the last five years, we have worked hard to bring balance back to Britain's public finances. The deficit is now half what it was when we took office in 2010. Nevertheless, there is still work to be done. Debt interest payments last year were £46 billion - more than we spent on schools.
The Liberal Democrat objective is to eradicate the structural current budget deficit by 2017/18 and have debt falling as a percentage of national income, so it is back to sustainable levels by the middle of the next decade. In 2010, Liberal Democrats insisted the Coalition adopt a fairer approach to dealing with the deficit, using both spending cuts and tax rises, than the Conservatives had planned. The Conservatives now want to scrap this approach entirely and use only spending cuts to finish the job. We reject this proposal, which would do significant damage to Britain's public services and require punitive cuts to benefits on which some of the most vulnerable people depend.
So as we finish the job of balancing the books, we will use taxes on the wealthiest, on banks and big business and on polluters, and we will bear down on tax avoidance and evasion, to limit the impact of deficit reduction on public services. We do not think low and middle income earners should bear the burden of tax rises: our plans do not require any increase in the headline rates of Income Tax, National Insurance, VAT or Corporation Tax. In fact, our plans enable us to continue to cut taxes for people on low and middle incomes by raising the tax- free Personal Allowance.
Having a balanced approach on tax and spending enables us to:
- Protect the least well-off in society and users of public services from the impact of measures taken to tackle the deficit.
- Invest, over the Parliament, the money NHS chiefs say is essential to protect our health service.
- Extend the protection of schools' budgets to include early years and 16-19 education.
- Limit reductions in departmental spending to less than half the rate agreed for 2015/16.
- Limit welfare reductions so we do not destroy the essential safety net that protects us all in times of crisis.
- Continue to spend 0.7% of Gross National Income on international development aid, helping the poorest in the world.
I hope this explains the policy a bit more and the reasons why we are looking have some limited tax rises along side spending cuts in order to balance the government finances.