London Introduces New Basement Tax

Aura Communities Blog

London introduces the UK’s first “basement tax”

Published 9th September 2016 

Digging a basement in London, before the basement tax

The London property market has traditionally seen very high prices in the Capital as the demand to live in this vibrant city continually outstrips supply.

The very high end of the market has traditionally refurbished the existing housing stock into often spectacular spaces on tight inner city sites. But whereas refurbishment means it is not possible to build higher or on more of the site footprint due to planning regulations, digging down is often considered the best solution to create more space.

These so-called "iceberg homes" have been constructed for many years. Soaring property prices have meant an even greater demand to excavate below the house or garden and to build more rooms, swimming pools, gyms, nanny flats or additional living space.

This month the City of Westminster – the London Borough which covers central London - introduced a new “basement tax” with an average fee of £8,000 (€9,500) for new planning applications seeking permission to build downwards.

Any basement excavation project in a tight inner city area creates noise, vibration, dust and general disruption to the streets and are therefore very unpopular with neighbours.

Construction works in the ground may easily last over a year and so Westminster Council have taken the decision to impose the tax on new applications, with the size of the fee varying depending on the size of the project, length of the works and the likely disruption.

Given that Westminster Council already receive income from parking bay suspensions for construction traffic, scaffolding licences, hoarding licences, etc, many critics argue this is simply about taxing the wealthy residents rather than addressing neighbours concerns.

With the average terraced property in Westminster sold for £3,024,566 in 2015, the tax is unlikely to deter most clients from increasing the size of their homes.

So far the tax only applies to homes in Westminster but if successful it could spread throughout London.