Older people affected by the Liberal Democrats’ proposed “mansion tax” could have payments deferred until after death if they are unwilling to pay up during their retirement, Nick Clegg has suggested.
The policy has been propelled up the political agenda after Labour backed plans for a levy on homes worth more than £2m, which it said could be used to pay for the re-introduction of a 10p tax band.
But the Conservatives have condemned their Coalition partner’s idea as a “con” and a logistical nightmare that would require the revaluation of millions of houses.
During Mr Clegg’s weekly radio phone-in on the London radio station LBC, the Deputy Prime Minister was challenged by the owner of a £5m house who complained that he would not be able to afford to live there if the tax was introduced.
Mr Clegg told the man, whose name was given as John, that older people would be able to defer the proposed 1 per cent tax.
“You could make exceptions for those people who have lived in properties for a long period of time and have retired and obviously aren’t in a position to pay that kind of levy every year. You could pay it as part of your estate,” he said.
Were Mr Clegg’s idea to be put into practice, surviving relatives of wealthy individuals could find themselves paying three “death taxes” – deferred payments of the mansion tax, the existing inheritance tax and social care bills.
During the confrontation, the caller explained that his home in the up-market St John’s Wood had “sky-rocketed” in value since he bought it.
He said: “I earn a reasonable salary. I do not earn as much as Mr Clegg but I’m happy with what I earn, but no way could I afford to buy a house now for anything like £5m.”
He said he would face a £30,000 annual payment under the tax, which he could not afford and which would take his total tax rate to 78 per cent.
“My only option would be to sell the house my family and I have lived in for 20 years and withdraw my children from school,” he told the Deputy Prime Minister.
Mr Clegg agreed that John would indeed be better off if he moved out. He said: “I’m obviously not urging you on selling your home but if you were, as your children get older and so on, to decide to sell your home, you would be millions of pounds better off… That’s one thing which I don’t know whether you’re prepared to do anyway.”
John retorted: “It’s my home and I have to move out of the area.”