Land Value Tax

What is LVT?

Land Value Tax is a charge on the unimproved value of land (i.e. it is a tax on the land, not the building that’s situated on it).

It is deemed to be the least-worst of all the taxes because it does not distort other economic decision. Put another way, if you tax work you get less of it, if you tax output you get less of it, if you tax land you still have the same amount of land. With the changing price the market doesn’t produce more of it, or demand less of it (it is a necessity) so taxing it doesn’t produce unwanted changes elsewhere in the economy. Obviously, land owners who have to pay it are not so keen, but they are simply being asked to pay to the rest of society for the private use of a common resource (land).

This film is a good overview of LVT (though not completely in line with the Transformation Deal)

Below is an outline of how much LVT would raise as part of the Transformation Deal and from which types of land. I will discuss how this can be done at another time in the near future

Total Tax raised from LVT

Type of land Total LVT Revenue (£bn)
Residential Land 158.85
Agricultural Land 6.93
Commercial Land 51.155
Govt Land 9.9
Total 226.83

Residential Property/Land

Residential property
Number of properties (million) 27.87
Average property value (£k) 188
Total value (£bn) (Ave value x No. of properties) 5,239
LVT @ 3.0% (£bn) 157.17
Average Charge per household (£) 5,640

Vacant building plots

Vacant plots (with planning permission)* Average charge per plot Total raised (£bn)
300,000 5,640 1.68

*This number might be as high as 600,000 but I have used a much more conservative figure to avoid over-estimating.

Produces a total revenue of £158.85 bn

Agricultural Land

Farmland (2014)
Area (m acres) 41
Price per acre (£k) 8.5
Total value (£bn) 346.5
LVT @ 2% 6.93

Commercial Property/Land

Commercial Land
Current value of commercial land (£bn) 787
LVT @ 6.5% 51.155

Government Property/Land

Government property
Current value of Govt Property 330
LVT @ 3% 9.9

It is worth pointing out, that LVT is the only tax that will apply to land, which will be exempt from all other taxes such as Indirect Taxes, Inheritance Tax, Income Tax, Capital Gains Tax etc. This will prevent double taxation on Land (which often happens under the current system) and provide a much simpler approach to land taxation than is currently in place. It will also avoid distorting land transactions and land outputs.