How tenants could end up paying £2,500 mansion-tax charge in form of higher rent

Andy Burnham has been urged to protect tenants amid fears landlords could try to make them pay for a £2,500-a-year mansion tax bill through higher rents. It would be “indefensible” if landlords owning homes worth over £2m made their tenants pay the cost of the new surcharge, renters’ rights groups told The i Paper. Potential rent increases could affect young renters sharing larger homes in upmarket parts of London and the South East of England, they warned. Shorts Labour is bringing in the high-value council tax surcharge – nicknamed the mansion tax – on properties valued over £2m in a bid to address wealth inequality and raise more money for the Treasury. Owners of homes valued at over the £2m threshold will be expected to pay £2,500 a year from April 2028 – rising to £7,500 a year for homes worth over £5m. Propertymark, the body representing estate agents, has claimed that the Government has not yet provided enough clarity on who is responsible for paying the £2,500 annual surcharge where homes are rented out. It has urged ministers to let owner-landlords decide whether they or their tenants pay the new charge – reflecting the flexibility which already exists for council tax bills. However, the Government has insisted that it has made clear that it is owners, and not renters, who should be paying the new surcharge. Tax could be passed on in higher rents Paul Shamplina, founder of Landlord Action, which provides legal advice to landlords, told The i Paper that it seemed clear that the Government’s intention is “for the homeowner to pay the surcharge”. However, he warned that some landlords “will pass it on to tenants in the form of higher rent”. It could potentially raise rents by at least £200 a month in some houseshares in parts of London and the South East. Rented houses potentially affected “aren’t necessarily mansions – it may be modest three- or four-bedroom properties in nice areas”, Shamplina added. Dunya Ali of the Acorn tenants’ union said the Government should also make “absolutely clear” that there is an expectation that landlords should not pass on the surcharge through higher rents, Ali added. “If you own a multimillion-pound property, the tax bill should be yours. Anything else is indefensible,” said the campaigner. Jae Vail, spokesperson for the London Renters Union, added: “The Government must guarantee tenants are not billed for the surcharge as part of their usual council tax bill, and it should prevent landlords from passing on the tax in the form of rent increases.” Mansion tax-related rent increases could go to tribunal Dan Wilson Craw, deputy chief executive of Generation Rent, said the surcharge may only affect a “small number of renters typically living in mansion blocks in London” if landlords try to pass it on in higher rents. The campaigner believes tenants could possibly challenge such a rent rise at tribunal under Labour’s new Renters’ Rights Act – but he said it was unclear how the tribunals will treat any matters related to council tax or the mansion tax. Under the Renters’ Rights Act, landlords can only increase rents once a year after the first 12 months of a new tenancy. Increases must be in line with market rent. “If an empty property liable for this surcharge is being put on the open market, you could certainly see higher rent,” said Shamplina. “I think that’s inevitable.” ‘Landlords can’t absorb costs indefinitely’ Chris Norris, chief policy officer at the National Residential Landlords Association (NRLA), said the mansion tax would add to the “tax burden” on some landlords. “Landlords cannot simply absorb costs indefinitely; they are inevitably passed on to tenants in the long run,” said Norris. Timothy Douglas, Propertymark’s head of policy and campaigns, said “further clarity is needed” on the Government’s plans for the mansion tax. “Unlike standard council tax, it would be paid by the property owner, although further clarity is needed on if such costs could be passed on to tenants in the case of a property being rented out.” A Treasury spokesperson said: “Renters will not be liable for the surcharge and the vast majority of homes liable to pay are owner-occupied.” The Prime Minister is said to be considering reducing the mansion tax threshold from £2m to £1.5m to raise more money for the Treasury. Around 165,000 homes are expected to be hit by the new mansion tax. Lowering the threshold to £1.5m would affect an extra 137,000 households. Some Labour MPs are urging Burnham to go further than just widening the scope of the mansion tax. The Labour Red Wall Group have called on the new Prime Minister to scrap council tax completely and replace it with a new, fairer, proportional property tax. The Fairer Share campaign group has said people in poorer areas are “deeply penalised” by the current system, which is based on outdated 1991 property values.