The Mansion Tax

[Sue]

It always amazes me how unwilling people are to pay tax. On anything.

We have an amazing free at the point of use health service. We have other free at the point of use public services.

Why should we not pay tax? Where else would the money come from?

The Tories promised to reduce income tax (and subsequently did) in order to get elected. 

It was all downhill from there, in my opinion. 

Not that I know much about either economics or politics, so do feel free to explain to me the errors in my thinking.

Re people living in big houses after their life situation changes, that saying about criticism and walking in someone else's moccasins springs to mind. At least, it would if I could remember exactly what it was 🤣

[Dogkennelhillbilly]

2 hours ago, CPR Dave said:

Those 5 bedrooms are all tiny ... For context the minimum size for a two man prison cell is 8.5 square metres. 

It's hardly palatial luxury 

Today I learned that living in a 5 bedroom, £2m+ house in Dulwich is basically like being in prison.

Honestly, CPR Dave is the finest-crafted persona on the forum. He never fails to suck people in - I fall for it every time. It's top quality trolling (in the original sense of the word).

From the Subtle Art of Trolling:

troll v.,n. To utter a posting on Usenet designed to attract predictable responses or flames. Derives from the phrase "trolling for newbies"; which in turn comes from mainstream "trolling";, a style of fishing in which one trails bait through a likely spot hoping for a bite.

The well-constructed troll is a post that induces lots of newbies and flamers to make themselves look even more clueless than they already do, while subtly conveying to the more savvy and experienced that it is in fact a deliberate troll.

If you don't fall for the joke, you get to be in on it.

https://www.urban75.com/Mag/troll.html

[Penguin68]

1 hour ago, Ebenezer said:

"They can move" is basically gentrification in a sentence. 

No, it is punishing people you no longer like or care for, it is 'c;leaning' an area of people you consider undesirable. Forcing people to move house by taxing them for an asset they have already paid for out of taxed income (and remember you will also sweep up purchase tax as well...). Essentially the government is proposing nationalising land, with no compensation. If you have to pay government land rent for your property (which is what a wealth tax is in effect) you no longer own the property. The Government does.

[Cyclemonkey]

That's ........ an opinion I guess.

[Angelina]

1 hour ago, Sue said:

It always amazes me how unwilling people are to pay tax. On anything.

We have an amazing free at the point of use health service. We have other free at the point of use public services.

Why should we not pay tax? Where else would the money come from?

The Tories promised to reduce income tax (and subsequently did) in order to get elected. 

It was all downhill from there, in my opinion. 

Not that I know much about either economics or politics, so do feel free to explain to me the errors in my thinking.

Re people living in big houses after their life situation changes, that saying about criticism and walking in someone else's moccasins springs to mind. At least, it would if I could remember exactly what it was 🤣

People pay a lot of tax. By 2031, this will be the highest tax paid ever. Coupled with the fact that the amount of debt we have and the amount we pay for that debt is also at an all time high, you can possibly understand why people are against paying more tax

[Ebenezer]

@Cyclemonkey 

I get where you’re coming from, but I just don’t see this fixing anything.. It’ll just make whoever’s living there now a bit poorer, while the real issue gets ignored. In ED over the last 20 years, loads of pretty average terraces have gone up £500k–£1m without anyone doing anything. If we actually want to deal with unearned housing wealth, scrapping the CGT free pass on the main home would make a lot more sense (or at least cap it ...like in many countries)
 

[CPR Dave]

£63,000 in 19698 is equivalent to nearly £1,400,000 today.

Don't forget too that the way mortgages work, you pay almost the same amount in interest as you do for the property. So the actual cost to  buy a £2m house over 25 years is closer to £4m. 

Buying a family home to live in wasn't a get rich quick scheme. 

[malumbu]

23 minutes ago, Angelina said:

People pay a lot of tax. By 2031, this will be the highest tax paid ever. Coupled with the fact that the amount of debt we have and the amount we pay for that debt is also at an all time high, you can possibly understand why people are against paying more tax

Cost of Covid to government estimated at £400 billion

Cost to the economy of leaving Europe estimated at  £32 billion a year 

Cost  to UK due to Russia invading Ukraine £100 Billion plus

Some analyses suggest that by 2018/19, austerity had suppressed the economy by nearly £100 billion, equivalent to over £3,600 per household, and led to a 2% reduction in GDP by 2015. The long-term effects include a weaker economy, lower wages, and a failure to reduce the fiscal deficit as effectively as intended, partly because lower growth reduced tax revenues

You can do the maths yourself

[Cyclemonkey]

The average house in London was nothing like £68k in the sixties.  I suspect our fictional hard done by ED pensioner probably paid something more like £6k.  Also your interest calculations are  abit dodgy.  Our pensioner did not buy the house for £2m so would not be paying anything like that interest.    As for more recent buyers, I doubt many purchasers of £2m houses are doing so with a 95% mortgage.

@Ebenezer I agree with CGT on primary residences.

There are a few ways to cut this bit the fact remains housing wealth has been  massively undertaxed and it is a growing source of intergenerational inequality.

Edited 3 hours ago by Cyclemonkey

[malumbu]

6 minutes ago, CPR Dave said:

£63,000 in 19698 is equivalent to nearly £1,400,000 today.

Don't forget too that the way mortgages work, you pay almost the same amount in interest as you do for the property. So the actual cost to  buy a £2m house over 25 years is closer to £4m. 

Buying a family home to live in wasn't a get rich quick scheme. 

???

Average London house prices in 1970 (from land registry) = £5190, £72,000 in today's money.

London houses were getting on for 5 times the national average wage in 1970, if we used that as a formula that would be around £200k for an average London house today.  

 

[CPR Dave]

Houses subject to these taxes aren't the average house though either. 

 

They are ordinary houses that just happen to be marginally more expensive than the ones the Rachel Reeves and Keir Starmer each rent out. 

[malumbu]

No they are not ordinary houses.  None of the ordinary people I hang around with live in £2m houses.  Many people I work with will never be able to afford any house in London.  Most people's kids will not be able to afford a house, unless fortunate enough for some serious inheritance.

So on your formula a £2m house is around four times the average price of a house across the whole of London.  Back to my 1970s prices, £20k (not £68k) that would be equivalent to £300k based on inflation or £800k based on wages in today's prices.  

 

 

[Sue]

1 hour ago, malumbu said:

Cost of Covid to government estimated at £400 billion

Cost to the economy of leaving Europe estimated at  £32 billion a year 

Cost  to UK due to Russia invading Ukraine £100 Billion plus

Some analyses suggest that by 2018/19, austerity had suppressed the economy by nearly £100 billion, equivalent to over £3,600 per household, and led to a 2% reduction in GDP by 2015. The long-term effects include a weaker economy, lower wages, and a failure to reduce the fiscal deficit as effectively as intended, partly because lower growth reduced tax revenues

You can do the maths yourself

Thank you, Malumbu.

I was going to say something similar, but I didn't have the figures.

[DuncanW]

For folks who are trapped in £2M houses that they just simply can't move away from and see themselves as asset rich but cash poor as they bought it for a small fraction of the current value back in the 80's or whenever, how about this: House inflation in the UK is currently 2.6% pa* - that equates to £52,000 per year gain on the asset. Don't worry at all about the money you've earned to date by just simply living in your own house, but from this point you could realise (borrow against) that whopping £52,000 a year that the property is going up by, and cover this new tax amply.

*yes I'm aware London is dragging compared to national figures here, but family homes in London are outperforming smaller properties, and that has certainly not always been the case.

 

[Spartacus]

So much bitterness is being aired here towards people who own their own house 

Sad

[CPR Dave]

The new tax will go up annually by the rate of CPI which is a lot more than 2.6% under this government.

but the threshold is not going to be increased by inflation. So soon enough a lot more of you people will be living in mansions that are subject to this tax.

[Penguin68]

10 minutes ago, CPR Dave said:

but the threshold is not going to be increased by inflation. So soon enough a lot more of you people will be living in mansions that are subject to this tax

Certainly the threshold won't be increased, but, additionally, once the position is accepted that central government can impose a rental, for no return, on property you might expect it to be widened. Remember Council tax, also a tax on property, is in exchange for the services we get from our local council, but this property tax is in exchange for nothing. Indeed those hit by this tax are amongst the relatively few people, in general, who are net contributers to national income, as opposed to net benefitters.

[Rockets]

1 hour ago, Sue said:

It always amazes me how unwilling people are to pay tax. On anything.

We have an amazing free at the point of use health service. We have other free at the point of use public services.

There was an interesting chat about this on the budget The Rest Is Politics and they highlighted a challenge that taxation levels are now getting to Scandinavian levels yet our public services are nowhere near as good as theirs and the government is pouring money in to, for example, the NHS but people aren't seeing the improvement as (the politically dreaded) productivity is actually going down. They cited 20% to 30% more investments in nurses etc yet productivity is at around 7.8%.

This is a big challenge for the government because if people don't feel the difference or feel they are getting good value for money they will turn on them very quickly.

[van dessel]

Just had fun on RightMoves - luckily everything on my street is sub £2mm so if the valuation method is recent trading multiples then we'll all be OK...for now.

 

The new tax law might create an artificial resistance point at the £2mm level where natural inflation will not bring a certain population of houses over the threshold.

 

If I had unlimited funds this place would be AMAZING!! https://www.rightmove.co.uk/properties/162706352?utm_campaign=property-details&utm_content=buying&utm_medium=sharing&utm_source=copytoclipboard#/&channel=RES_BUY

Total 1-off that obvs pre-dates the other houses around it. 

[Cyclemonkey]

That beacon of socialism and notorious envier of home owners - the USA  - has a property tax.  Generally an annual charge based on the fair market value of your house.