Lib Dems double mansion tax threshold

Monday, 30 November 2009 11:45

The Liberal Democrats have doubled the threshold at which homeowners would pay an annual "mansion tax" under proposals they announced at their party conference in September.

Properties worth £2 million would now incur an additional 1 per cent charge - properties worth over £1 million would have incurred a charge of 0.5 per cent under the originally proposals.

Lib Dem leader, Nick Clegg said the "principle" remained the same but that he and Vince Cable, the party's treasury spokesman, had looked at the figures again.

The proposed tax would pay for the Lib Dems to honour another pledge to scrap income tax for the lowest earners taking around four million people earning less than £10,000 a year out of the tax system altogether.

Under the original proposals those with property worth over £1 million would have paid an additional 0.5 per cent in tax on the value of their property over and above stamp duty. That would have meant someone with a house worth £1.5m would have had to pay 0.5 per cent tax on £500,000, amounting to £2,500.

However, the proposal prompted anger among Lib Dem MPs, including members of the frontbench team because they claimed they had not been consulted on the proposal by Cable.

Several MPs voiced concerns the proposal would damage the party's chances at the forthcoming general election in London and the south of England, where property prices are highest, and would penalise poorer pensioners living in large properties.

Under the revised proposals a one per cent annual charge would be made on homes with a value above £2 million.

But someone with a home worth £1.9m would now pay nothing. Under the previous proposals they would have faced an annual charge of £4,500.

Mr Clegg told BBC's Breakfast: "The principle is very clear. People who live in very large houses, mansions, should pay some more money, so we can give some back to the majority of British taxpayers.

"It does what it says on the tin. It's a mansion tax. It goes towards what many people want from the tax system.

"Nothing has changed in terms of the principle... We are the only party in British politics who have a plan to make taxes fair. This is a simple, fair, do-able plan."

The Lib Dems say they will raise the threshold at which people start paying income tax to £10,000 and that this will leave poorer families about £700 a year better off.

But four million top-rate taxpayers will lose out as they will no longer be able to claim tax relief on their pension contributions at the higher rate

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