Coalition explores mansion tax idea

Conservative MPs have been working to reduce the 50p tax rate, which applies to incomes above £150,000, to 40p.

However Vince Cable, with the support of deputy prime minister Nick Clegg, has voiced his opinion that the old rate should only be scrapped if replaced with new taxes on unearned incomes.

The ‘mansion tax’ would apply to homes above the value of £2million and would cost the owner 1% of its value each year.

Liberal Democrat MPs would also like to see a rise to the minimum tax threshold.

In its favour, an increase in the minimum threshold would help low-paid workers keep more of their income and a ‘mansion tax’ would help address UK residents who utilise overseas bank accounts to avoid tax burdens.

Opponents of the tax say that it would be unfair to individuals who have invested in property decades ago and have seen the value rapidly increase, even though they are not classed as high income individuals.

Chancellor George Osborne will announce the details of his budget on March 21.