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Lib Dem rethink on 'mansion tax' Lib Dem rethink on 'mansion tax'
(about 4 hours later)
The Liberal Democrats have doubled the threshold at which they say homeowners should pay an annual "mansion tax".The Liberal Democrats have doubled the threshold at which they say homeowners should pay an annual "mansion tax".
Properties will now have to be worth at least £2m to incur a 1% charge - the previous plan was to charge 0.5% a year on a property's value above £1m.Properties will now have to be worth at least £2m to incur a 1% charge - the previous plan was to charge 0.5% a year on a property's value above £1m.
Party leader Nick Clegg said the "principle" remained the same but "we just looked at the figures". The party is also pledging to raise tax thresholds to £10,000 a year, taking four million people out of income tax.
The party is also pledging to scrap income tax for four million people earning less than £10,000 a year. Party leader Nick Clegg said the plans "would put £700 back in the pockets of the vast majority of taxpayers".
Treasury spokesman Vince Cable unveiled the mansion tax proposal at the Lib Dem annual conference in September. But four million top-rate taxpayers would lose out as they will no longer be able to claim tax relief on their pension contributions at the higher rate.
Mr Clegg said tax would be "one of the key dividing lines" between the parties at the next general election - and the Lib Dem proposals were "fairer" because they helped the poor and ensured the "very rich" paid more.
'Not a U-turn'
He insisted the party had not been forced to do a U-turn on the mansion tax policy after complaints from Lib Dem MPs in marginal constituencies in the South of England, who feared it would harm their chance of re-election.
"It is not a U-turn. A U-turn would be abandoning the policy," said Mr Clegg.
KEY PROPOSALS No income tax paid on first £10,000 earnedTax relief on high value pensions reduced1% annual 'mansion tax' on a property's value above £2mTax loopholes closed10% temporary tax on bank profitsMore green taxes Robinson: Questions for Clegg
Instead, he said the party leadership had "looked in more detail" at property values before deciding that a tax aimed at the owners of "very high value properties" should be levied at £2m.
"We don't want family homes caught up in local property bubbles to be hit. We want to ensure that only the very wealthy pay this tax - pay their fare share so that we can offer tax cuts for everybody else," said Mr Clegg.
He said the £2m mansion tax "does what it says on the tin" and would generate more money than the original £1m proposal, as it was a 1% annual levy.
The £1.7bn raised would help pay for tax cuts for low-paid workers - making the Lib Dem proposals the fairest of the three main parties, he added.
He said: "Our plans represent the most radical, far-reaching tax reform in a generation.
"They embody everything the Liberal Democrats stand for: fairness, protecting the environment, rewarding hard work.
"It is right to ask those with the broadest shoulders to bear a little more of the burden so that millions of people on normal earnings get the break they desperately need."
He said the tax package was not about "envy", it was about fairness and boosting "enterprise and initiative" by ensuring the low-paid did not pay a greater share of their income tax than the wealthy.
"Why should not those at the top chip in more to help out?," asked the Lib Dem leader, adding: "Our tax plan is simple, it is doable but above all it is fair."
'Fair'
Treasury spokesman Vince Cable confirmed that the party's next election manifesto would also include a temporary 10% tax on bank profits and green taxes to penalise polluters, as well as proposed crackdown on tax loopholes.
Mr Cable unveiled the mansion tax proposal at the Lib Dem annual conference in September.
The plan would have seen people having to pay 0.5% of the value of their property above £1m each year - so someone with a house worth £1.5m would have had to pay 0.5% of £500,000, which is £2,500.The plan would have seen people having to pay 0.5% of the value of their property above £1m each year - so someone with a house worth £1.5m would have had to pay 0.5% of £500,000, which is £2,500.
But it prompted an angry reaction from senior Lib Dem MPs, including members of the frontbench team, who said they had not been consulted.But it prompted an angry reaction from senior Lib Dem MPs, including members of the frontbench team, who said they had not been consulted.
'Simple, fair, do-able'
Many in the party said they feared it could damage their election prospects in London and the south of England, where property prices are highest, and would penalise poorer pensioners living in large properties.Many in the party said they feared it could damage their election prospects in London and the south of England, where property prices are highest, and would penalise poorer pensioners living in large properties.
Mr Clegg told BBC One's Breakfast: "The principle is very clear. People who live in very large houses, mansions, should pay some more money, so we can give some back to the majority of British taxpayers.
"It does what it says on the tin. It's a mansion tax. It goes towards what many people want from the tax system.
"Nothing has changed in terms of the principle... We are the only party in British politics who have a plan to make taxes fair. This is a simple, fair, do-able plan."
The change will see the property price threshold raised, so that the charge only applies on the value of a property above the £2m mark.The change will see the property price threshold raised, so that the charge only applies on the value of a property above the £2m mark.
'Most radical for a generation'
So, for instance, it would be payable on £500,000 of a £2.5m home.So, for instance, it would be payable on £500,000 of a £2.5m home.
It would mean a person living in a house worth £2.5m paying £5,000 a year in tax.It would mean a person living in a house worth £2.5m paying £5,000 a year in tax.
But someone with a home worth £1.9m would now pay nothing, whereas they would have faced an annual charge of £4,500 under the original mansion tax plans.But someone with a home worth £1.9m would now pay nothing, whereas they would have faced an annual charge of £4,500 under the original mansion tax plans.
The Lib Dems also say they plan to use the revenue generated from this and other tax rises for the better off to help those on lower incomes. The new proposals would affect 70-80,000 properties, compared with about 240,000 under the original policy.
They say they will raise the threshold at which people start paying income tax to £10,000 and that this will leave poorer families about £700 a year better off.
But four million top-rate taxpayers will lose out as they will no longer be able to claim tax relief on their pension contributions at the higher rate.
The full plans will be announced later, with the party describing them as "the most radical tax reform in a generation".