to think the idea of a mansion tax just penalises London and the south

[Redpipe]

I will probably get flamed for saying this but I don't believe that owning a 2 million pound house automatically makes you rich. Certainly in London a 2 million will not buy you a mansion, more like a terraced family home.

AIBU to think that the idea just penalises people in the south?

Beastofburden - but the City of Westminster (for example) is not a charity, and I believe they do pay some taxes.

If the City of WM owns residential buildings exceeding 2M (and they certainly do), on what basis should they be excluded from the mansion tax? Should all landlords be exempt?

The thing is, you are saying he may have to move when he doesnt.

So is this thread really about him moving, or about mansion tax in general.
[which I presume may apply to you too, and is probably what this thread is really all about].

Sweetsweep

You presume wrong. I used this guy as an example because people predictably were jumping in with arguments that if you own a 2m property you had the money to pay for this tax. I was trying to show that this is not always the case and the only way to pay for some people would be to sell their home with all the negative implications that could have on their life.

It is not about moving it is about the misconception that a house price has any relevance on your day to day wealth unless of course you sell it AND move some where else.

Crowler- I can't see any justification for a blanket exclusion on all landlords.

This is only a tax; if you don't pay any taxes, you wont pay it. Lots of public bodies and charities are exempt from taxes as it is- Public bodies like local authorities, I dont think pay taxes; Housing associations, like Universities, churches and the like, being charities already, I am sure don't.

redpipe- my view is your neighbour should not have to pay any cash during his lifetime, but that the estate has to pay the accumulated tax on his death. His estate will still be very much larger than if he had lived somewhere else.

But Westminster does pay certain taxes to the federal government. Like VAT. Why shouldn't they pay this?

beastofburden

So in this scenario, the banks will be the biggest winners out the mansion tax then and the house owner will lose a large percentage of the increase in his property even though when he dies a huge proportion would be taken in tax anyhow. If you think that's ok then I can't debate this any more with you.
Each to their own.

federal government, crowler? we dont have one of those here...

VAT is a funny tax. You get exemption a different way, because it is too complicated to rock up in a shop and demand a different price from everyone else. So you get what is called partial or full exemption. You tell the VAt man how much VAT you paid in the last quarter, and you get a refund of some or all of it, depending on how much of your income is from what they call "exempt activities" and how much from "business activity". The main thing is never to try to understand how the VAT man decides this, because it will make your eyes bleed. For instance, in a University, which is a charity, any activity which support research is VAT exempt (unless its commerical research) but teaching isn't because, even before the £9k fee came it, it was deemed to be a "business activity". So Universities tend to pay VAT at a lower rate than the general populationl but you would never know that unless you saw their VAT returns.

Is this a new kind of TMI?

redpipe, not a very large proportion of what would be truly astonishing wealth to people in almost any other part of the country.

I am not sure if I do think it's OK or not- I am just saying that it is not automatically a cashflow issue.

I'm sure you can see my point that I'm trying to make.

Exempting Westminster is another subsidy to a pretty fortunate group: is there anyone who is luckier than one sitting on a lifetime tenancy agreement in Knightsbridge?

And it does beg the question: how to manage the mansion tax as it hits landlords & they pass it onto their tenants - the poor ones. Do you pass a law forcing LL's to absorb it? Do you increase HB? Do you exempt landlords who have poor tenants? How do you distinguish between a property that generates rent of 5K per week vs property that generates 100GBP per week? How do you maintain it?

It's not great but the fact remains that he would not "lose" anything - his heirs would receive less inheritance than they were maybe expecting but he would be able to stay in his own home. Going on the grounds that mansion tax comes in (I have already said I'm against it so I'm arguing from a pragmatic point of view) how do you think he should pay it?

Or should he not and risk going to prison?

beastofburden

It depends on ones attitude to debt. If one has paid of their mortgage and is risk adverse they may not want to equity release. The property could go down in value and there is potential for the person to have nothing left.

Equity release is not something everyone would be comfortable doing and I don't think someone should have to do it to pay a tax that could have no bearing on the actual sale value of the property.

Will the person get the debt interest and fees paid back for them if the property does decrease significantly in value before they sell?

crowler- not trying to be obtuse! thanks for the extra detail.

So two separate scenarios.

Westminster lifetime tenancies- here we have a group of tenants where the suggestion is that the local council ought to be charging them a lot more rent. Getting the Council to pay mansion tax and then pass it on would in this case result in a rent increase that would strike most people as pretty fair.

Other landlords whose tenants are likely to be far more vulnerable- that is to be avoided as they already pay far too much in rent.

Using any tax and sundry exemptions or rules around it to control rents indirectly is probably going to be full of these contradictions and a danger of outcomes that we would all agree are bad. Mansion tax is only one of the costs that might vary for landlords. The other big one is interest, of course. Other places have discussed whether we ought to have rent controls in place, rather than relying on the market to stop people overcharging.

In all this I seem to have ended up looking like a supporter of the tax. I'm not really, it's just that not all the arguments against it here seem to me to be quite right. I think my view is you could raise a lot more by closing the loopholes that allow people (often sophisticated, wealthy individuals) to use companies to avoid paying a proper amount of stamp duty.

It's not great but the fact remains that he would not "lose" anything

That is not true. If he used equity release and then decided to sell and the property had gone down in value or stayed the same he would have lost a lot.

Property prices are never real until someone has completed. This fluctuation especially over years is why this tax is frankly ridiculous, to implement, manage and is unfair.

But he doesnt have to sell either, does he. That is the problem with what you are saying. That, and because you live in a bubble, that 2m is not rich which staicks on my throat rather.
fwiw, we have sizeable assets too, but I always keep my feet on the ground money wise, regarding wealth, and have an understanding of others plights.

Redpipe- I would never recommend equity release myself. I think the bill should just be deferred, not paid at all during ownership of the property, if the person asks for this option.

I think then in practical terms it would just be a charge on the estate, ie, like inheritance tax.

But as I say, I would prefer them to close the stamp duty loopholes first before they did this at all.

But it's his house, he should be able to make decisions on when and why he wants to move not move to service a tax levied at today's price when he might want to sell later.

Frankly this thread is woe is me.

Be grateful for what you and others have.

End of rant.

Have the Liberal Democrats stated what they would do with the money
gathered from this Mansion tax.

The amount of money they say it will
bring is hotly disputed by different organisations.
Persumably the valuations of property will be based on optimistic estate agent valuations, these could be 20% to high anyway. When the Mansion tax starts to bring in less than half what they thought it was going to bring in. The socialists will just lower the threashold. But VINCE needs to be careful because his constituency is Twickenham. If he goes to low, guess what VINCE will be out on his ear.

These taxes that just garner public support on the basis of it does not effect us, and are not going to make the country any fairer. These taxes are gimmicks to very naive people who believe taking more tax from wealthy people will somehow make there lives better. Even rich people have limits to what they can spend, so say a rich person has to find 5-10k pa to fund this tax, he/she might have to cut back on a cleaner or only go to a restuarant 3 times a week rather than 4 times. You might think "MY HEART BLEADS FOR THEM" but what about the cleaner, or the local resturant owner who needs the custom to stay in business.

beastofburden
I agree with you there.

The amount of money they say it will bring in, is hotly disputed by different organisations.

The wildly inflated housing bubble is a trap.

It is possible that someone who bought a perfectly modestly priced terrace in an area that people found rough now sits in a house worth a million or even 2. If they then need to re-locate to another area of London or to a house more suited to their family's needs, and while still on the old income, they find themselves liable for a massive stamp duty and even mansion tax. Just to replace on terrace with another.

Likewise a woman who jointly owns a house with a man, purchased at a modest level, will now find that if she wants to separate and buy him out, she cannot afford to because the new market price of half the value the house is way way beyond what she could get a mortgage for. And she may not even be able to buy a flat for half the value of the house.

And living in London is often the only way people can make a living. DP and I would be very very unlikely to both find work in a regional city, and we don't earn enough to have only one work.

It is a trap.

However, we will be rich-ish when we sell our house and retire elsewhere. (It is a v modest semi, tiny garden, not worth £2m, or £1m, and not a mansion!)

redpipe, the whole point about deferring the tax is he doesn't have to move. Or borrow. Because he doesn't have to pay any cash. Until he dies.

So suppose he has to pay this tax. His house is assessed as "worth" £2.5m, so he has been liable for 1% of £500k for let's say five years before his death. So when he dies he owes £25,000 in back taxes, which comes off the sale of his house- which fetches a cool £2.5m or maybe more.

Meanwhile his theoretical sister who moved to Liverpool also dies and sells up for £130k.

I can't see how this has affected his right to live in his own home, or his income? and his heirs have profited from an astonishing windfall in the value of his home.

Of course it is nice to keep our wealth. The question is how much of it we hand over to fund society, and whether this is a reasonable way to raise some of the money we need to do the things we agree we want done. As I keep saying, I'd like to see how much stamp duty is avoided by all the legal schemes before I formed a view on whether we even need to cosider a mansion tax. But I think it could operate without causing the things that you are specifically worried about.

redpipe- cross posted with you :)

Talking of equity release, if you are mortgaged to the hilt your true assets are quite low. On the other hand, if this tax were only applied to people who fully owned their houses, it wouldn't be difficult to remortgage.

I think this tax is aimed at people who have massive properties in the UK, pay no income tax here and have all their money in secret bank accounts, not Mr and Mrs professional in Putney who have been lucky on the property market, pay private school fees and have foreign holidays. As others have said, the additional tax would be maybe £1k a year, and they can pay that the next time they get new kitchen appliances - its not actually that hard to tax Mr and Mrs professional through income tax and VAT.

However, sadly I don't think it would be a particularly successful way to tax mr and mrs 'stay here twice a year to visit harrods' either.

agree, merrymouse, these guys are experts at tax avoidance- and they are exactly the ones who buy through companies to avoid stamp duty. Perhaps a stonking rise in Council tax for non-UK tax residents?