And They're Off...

The next five months will be dominated by the forthcoming General Election in May. The result of this election is likely to have a major impact on tax policy and the way forward for Britain and, indeed, starting with the party conferences in the Autumn, followed by the Autumn Statement, the parties have already started jockeying for position. Tax changes are high on the agenda for all three main political parties and Withers have recently surveyed the views of leading members of the UK's wealth management industry to see what we might expect.

One of the main themes of George Osborne's Autumn Statement (for more details on the Autumn Statement see the Withers' Stop Press) and the one thing the parties agree on, is that income and inheritance taxes are likely to be reformed in the next Parliament, in addition to which a levy on high value residential property may be introduced.

The so-called 'mansion tax' has generated a number of headlines in recent months. The Conservatives nailed their colours to the mast in the Autumn Statement with their reform of SDLT. Although this reduces the tax bill on buying a house for the majority of the population, in many ways this is a mansion tax by the back door, with all properties being bought for more than £937,500 now having a larger SDLT bill than was previously the case.

This approach, i.e. a higher charge on purchase rather than regular charges, is in contrast to both the Liberal Democrats and Labour who have advocated an annual charge. The Liberal Democrats have revised their long-standing policy on mansion tax by calling for increased Council Tax bills on homes worth over £2m.

Labour, on the other hand, would impose a mansion tax on all properties worth over £2m from 'day one' if they win the election, and actually would backdate this to 6 April, the start of the tax year. Ed Balls plans to levy an average annual tax of £12,000 on over 100,000 UK home owners with immediate effect. Concerns have been widely voiced as to the imposition of a significant new tax on those who may not be cash rich, and a number of traditional Labour supporters in London in particular are very uneasy about the proposal.

84% of wealth managers surveyed do not think a mansion tax should be introduced, but notwithstanding this, it is clear that a change will be introduced, be it the changes to SDLT or a more standalone charge. The permutations with potential coalitions make this very hard to call and all owners of valuable...