The British Property Federation (BPF) has welcomed a Liberal Democrat announcement that it plans to impose a ‘Mansion Tax’ through new council tax bands rather than through imposing a brand new tax on £2m+ homes.

Speaking at Bloomberg’s European Headquarters today, Treasury Chief Secretary Danny Alexander said that the Liberal Democrats’ revised Mansion Tax plan would mean revaluing homes worth more than £2m and placing them into a number of additional council tax bands. Previously, the party had intended to charge owners 1% of the value of their home that was above £2m.

The BPF had warned that turning the taxation of high value homes in to a political football was harming investor sentiment. Uncertainty over the Mansion Tax had reportedly seen some investment delayed and some major development stall, and particularly could dissuade institutional investors from investing in the private rented sector.

Liz Peace, Chief Executive of the British Property Federation, said:

Royal Borough Kensington by Colin Smith

Royal Borough Kensington by Colin Smith

We are delighted that the Lib Dems are taking this much more sensible approach to the Mansion Tax. The council tax system remains in principle a better way of taxing property, if the valuations on which it is based are up-to-date. At present we have a property tax that is based on 1991 values, when the average house in the UK was worth, £62,000, the Soviet Union was still in existence and Bryan Adams topped the charts. Adding some additional bands of council tax makes sense as a sticking-plaster measure, but ultimately if fairness is politicians’ goal then only a full revaluation in conjunction with more bands will do this.

We would therefore still like to see all parties commit to a full revaluation of council tax by 2021, and make that part of their next general election manifesto commitments.”

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