So there we have it. There isn't going to be a mansion tax. And there isn't going to be a rise in top rate council tax as a proxy for a mansion tax.
But there is going to be a sudden rise in top rate stamp duty for houses that cost over £2m. That's going to make transactions look really expensive. A mansion tax would have been charged only on the part of the value of the house over £2m. So the owner of a £2.5m house would be hit up for whatever the tax would have been (say 1%) on £500,000 not on £2,500,000. So a bill of £5,000.
But someone buying a £2.5m house tomorrow - and not finding an avoidance route - is going to pay a total and immediate bill of £175,000. That's 35 years' worth of mansion tax.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Part of me really minds this on the basis that it is deeply irritating and market distorting that stamp duty is not a stepped tax (everyone tries to keep prices down around the margins).
I also know as we all do that fiscal drag will mean that the rise in stamp duty will hit many more ordinary houses than mansions in a decade or two. Prices will rise in nominal terms, but the tax bands never will.
Finally, of course, I just hate all rises in all taxes. However, I am pleased it has offered a political route to a small cut in the UK's top rate of income tax (which will now be 47% rather than 52% from next April) OCED research shows that taxes on income create the most excess burden for economies, so reducing them is pretty much always good.
I'm also pleased that it comes with a promise to increase the taxes paid by non-residents buying property in the UK. Until now, they have been able to avoid stamp duty on their transactions (via offshore companies) and they have not been liable for any capital gains tax when they sell. That has meant that their price of entry to the UK property market (and all the political and legal stability it brings with it) has been no more than the cost of a year's council tax (minus second home discount, I dare say). That's not much, given what the UK offers them.
Now, however, it looks like they will have to pay the 7% - at least. George Osborne is finally closing the loophole that has allowed them to avoid it by saying that any houses bought by 'non-natural' persons such as companies will have to pay stamp duty at 15%. The Treasury is also considering bringing in an annual charge on property transactions done via companies from next year.
Finally the government is working on yet another overdue move bringing in capital gains tax on the disposal of residential property by non-residents by next year. Will all this deter overseas buyers from picking up expensive houses? I don't think so. The cheap pound means that if you are buying in anything from euros to Singaporean dollars, UK houses still represent real value.
And it is also worth remembering when it comes to the domestic market that in the end it won't be the buyers who pay the tax it will be the sellers, for the simple reason that the 7% tax will force their selling prices down.
It also isn't going to prevent people buying £2m-plus houses in London to live in and get to work from: they live in London because that's where the networks are that make them the money that allows them to buy expensive houses in the first place that won't change.
-
8 of the best properties for sale near ski slopesThe best properties for sale near ski slopes – from a luxury cabin in Geilo, one of Norway’s premier ski resorts, to a large chalet in Valais, Switzerland
-
Cash hoarders take total UK savings to £2 trillion – why aren’t we investing?Investment-shy Brits are hoarding huge amounts of cash in their savings accounts. We look at the case for saving versus investing.
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
