There has always been a lot of shifting in the taxes governing the property markets.

This period is no different. The Liberal Democrat party has announced that should they be elected they intend to introduce a levy on homes valued over £2 million, this is following an announcement that the figure was to be £1 million, however it was quickly changed following criticisms that it was too low, those people hit would be those with high equity but restrained liquidity, namely those in the more expensive south west and elderly pensioners.

The higher threshold will reduce the number of homes potentially affected; now affecting around 75,000 rather than the original plan which would have affected 250,000. To balance the books however they have now increased the rate from the original 0.5% to 1% of the house value. For many this would mean taxes of over £5000 per year. For the average person this is a significant amount.

The thinking behind this tax is obviously that people who live in expensive houses can afford to pay more tax. However, is this true? Is the price of a person’s home directly related to their cash liquidity and therefore their ability to pay tax?; is this tax fair?

Recent studies have shown that in many cases, while there is a correlation between house price and income, this doesn’t necessarily mean that there is a link with a person’s liquidity.

For those wishing to invest in homes, especially those over a threshold of around 500,000 this may actually be something to think about if they are planning for the long term or as an investment in which the profit margins are not too great. In the last boom, house prices went up dramatically, for many this was beyond their initial expectations and though their equity may have gone up , in the boom peoples wages had not. Thinking about these future changes and making yourself aware of both existing and impending laws could make a big difference to the house buyer.