UK households with overseas properties could face a significant financial burden under the Labour government's proposed mansion tax, with experts warning of a 'double whammy' effect. The Treasury has confirmed that foreign homeowners who hold UK properties through companies will be required to pay both the existing Annual Tax on Enveloped Dwellings (ATED) and the new high-value council tax surcharge when it is introduced in 2028.
Double Taxation Confirmed
Labour Party Exchequer Secretary Dan Tomlinson stated: 'If a residential property currently attracts the ATED and is above the threshold for the high-value council tax surcharge, it will pay both.' This means that overseas owners could face two separate charges on the same property, adding to the complexity of the tax system.
Current ATED Charges
Currently, more than 5,000 homes valued at over £500,000 already pay an annual levy under ATED. The maximum charge reaches up to £303,450 for properties worth £20 million or more. The ATED was initially applied to homes worth over £2 million, but the threshold was lowered to £1 million in 2015 and further reduced to £500,000 in 2016. It applies to residential properties owned by companies, though exemptions are available for landlords.
Impact of New Surcharge
The new high-value council tax surcharge, set to be introduced in 2028, is expected to affect approximately 165,000 homeowners, according to the Office for Budget Responsibility. This surcharge will apply to properties above a certain threshold, adding another layer of taxation for foreign owners.
Expert Criticism
Nimesh Shah, of accountancy firm Blick Rothenberg, commented: 'When the Government introduced the high-value council tax surcharge, no one thought about ATED. We've created another layer of complexity and taxes, which has created more friction in the property market.'
Paul Holmes MP, shadow minister for Housing, Communities and Local Government, added: 'It's right that overseas buyers pay their fair share, but the Treasury's own admission exposes a muddled approach at the heart of the Government's housing policy.'
The double taxation has raised concerns about the impact on the property market and the fairness of the tax system, with critics arguing that it could deter foreign investment and complicate tax compliance.
