The proposed mansion tax will raise less money than politicians claim and steadily drag more and more homes into the net, a new report has claimed.
The proposed 1% annual tax on the portion of a property's value above £2 million would deliver gross annual receipts of just £1.3bn, which is 24% below the Liberal Democrat estimate of £1.7 billion and 35% below Labour’s £2 billion estimate, according to estate agency Knight Frank.
To hit that £2 billion a year target, the property value threshold would have to be reduced from the current proposed value of £2 million to £1.25 million.
That would more than double the number of properties affected from 55,000 to 140,000.
Over time, more and more houses are likely to be dragged into the mansion tax net, the report said. Assuming historic rates of price growth, the number of properties affected by the tax will increase from 55,000 homes to 775,500 homes over the next 25 years.
Liam Bailey, head of research at Knight Frank, said: “Our calculations point to the real threat of the mansion tax threshold being lowered substantially to meet the revenue targets of the political parties.
“Even if the threshold is not lowered, it seems a fair assumption – given that it has remained at £2m since 2009 - that it would not be raised in line with future house price inflation thereby substantially increasing the number of properties affected."
The tax would be levied overwhelmingly on London and the South East of England, with 86.4% of all £2 million-plus properties located in those two regions.
One in 10 of all £2 million-plus "mansions" are actually one or two bedroom flats.
The average annual payment is set to be £23,595 per property.
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