Proposed Wealth Tax

[BootsieBarnes]

It's been discussed in the press that the Chancellor is considering a one-off wealth tax of 5% on assets over £500k. Allegedly this is being considered as part of the March budget to make a dent in the huge Covid debt the UK is facing.

So in real terms that would be a £25k tax bill for someone who has assets valued at £500k, such as property.

What do you think about this? would your family be able to swallow a tax bill that size?

I'm not doing any research, I just read that and thought about the impact it would have on families living in houses in that price bracket.

I've put on voting as well for interest. I'm not actually sure where I stand on this as I can see both sides, so this is just an arbitrary allocation just for voting.

YABU - people with assets that big should pay

YANBU - that would be unfair

That would be horrendous.
I am all for tax reductions and greater personal responsibility e.g. health insurance.
That's not to say I disagree with tax in general. Obviously it is vital to maintain our society.

So if the Gov said to me at 16 (and I inherited no wealth), you will pay X amount tax and NI, that's a contract. I decide whether to get up at 6am everyday and work based on this tax taken. So legally it is retrospective to say after 40 years - hey I will take you more on what you earned backdated to 1969! So legally v dodgy. Easier to wack up CGT, Inheritance Tax Council Tax

I would hope that any capital gains tax on main residences could be offset by expenses, for example stamp duty, solicitors’ fees as well as being able to deduct costs for making repairs and improvements. For example if you bought a home for £500k, spent £50k on fees and doing it up and it sold for £600k then only £50k of that amount (the actual gain) should be taxable, not the full amount. Otherwise it would stall the housing market and no-one would even bother with essential repairs. Prices would drop, as would stamp duty receipts.

I don’t think it’s a good idea to further burden landlords, they have been hit with tax rises and costly regulatory obligations that means that letting carries high risks and costs for little reward. Holiday lets have far more favourable taxation rules and restrict housing supply in certain areas, whereas BTLs provide homes- and in most cases landlords are small time and decent, and are not making very much money out of it. But nobody complains about holiday lets.

If a wealth tax is a good idea, it should be introduced as a permanent part of out tax landscape. Introducing a new tax (or not) should not be primarily motivated by the need to raise money. You first design sensible taxes, i.e. ways to raise tax, then if the amount you need to raise changes, temporarily or permanently, you vary the rates for those taxes.

I don't agree it would be better to pay for COVID over 5 years rather than (say) 30, but if we did, I suspect the way to do is simply to increase rates of income tax and VAT. If it made sense to have other taxes, we'd probably already have them.

We could probably tax property more. I definitely don't agree with a wealth tax on pensions though, increased income tax as money is extracted would be a better way to get more money from that pot.

"We could probably tax property more. I definitely don't agree with a wealth tax on pensions though, increased income tax as money is extracted would be a better way to get more money from that pot."

But 77% of the wealth in this country is held in Property and in private pensions.

Neither of which are easy to hide or to move to Panama.

Why wouldn't you tax the things that are biggest, and easiest to see?

According to this article Sunak has already rejected the idea. Council Tax bands have not been revised for ages, so if they want to tax property assets, that would be the place to start. Realistically, being Tories, they will go for regressive tax hikes, i.e. use general taxation / VAT / unreformed Council Tax, rather than tax the better off, which they never want to do.

citywire.co.uk/wealth-manager/news/sunak-shuns-wealth-tax-with-cgt-hike-considered/a1451176

@PigletJohn - legitimate question as I know very little about tax & pensions.

1. How would they tax pensions when they are tied up in a non-touchable pot until retirement?
2. Likewise, how would they access equity tied up in a house of it’s not for sale?

1. tell the fund manager to remit x% of the value.

2. issue a tax demand

It also included pensions and assets like cars so people could quite easily go over the amount of £500k each.

Including cars would be ridiculous, they are a depreciating asset. I bought mine in September and 4 months later it's worth nowhere near what I paid for it. Also why would anyone pay more than the minimum into a pension if it's going to be included? Mine will be taxed when it pays out so why should I pay tax on it now?

Taxing pensions is silly as its taxed as income when you take it so if you reduce the pension pot people will have less money to spend and less tax coming in. Doesnt help the economy.

And a lot of people, even if they have a £750k house have pretty small pensions anyway.

Re property in a lot of areas growth in prices has just about kept in line with inflation so in real terms, in these areas nobody has made any money.

Political suicide. Won't happen.

Terrible as in the SE. Just no

In America they pay property tax on the value of their home. Paid yearly.

True, but it's not much in most places. My house is worth about $600k and the property taxes are about $9k. They fund local schools and services. In many other areas, the same value house would pay half or less than I do. Property taxes are also deductible from income for federal income taxes.

Real property is pretty easy to assess the value of. Not so for other types of property like a family business, works of art, etc. Most countries that have tried a wealth tax have abandoned it as unworkable.

I think it would be ridiculously unfair. As if we don’t pay enough tax!

It’s as if the harder you work, the more you study and save, the higher you climb up the career ladder, the more money they take away from you.

People should be allowed to keep their assets and income, not give more and more away in tax.

@HikeForward

I think it would be ridiculously unfair. As if we don’t pay enough tax!

It’s as if the harder you work, the more you study and save, the higher you climb up the career ladder, the more money they take away from you.

People should be allowed to keep their assets and income, not give more and more away in tax.

I agree. One principle of taxation that we've been able to mostly stick with in the US is that the government gets one shot only at taxing your income.

9k a year is a lot on a 600k house. Much more than is being proposed for the UK. That’s 1.5% a year - the proposal for the UK was an annual tax of 0.48% on the value of your home or 1% for second/third homes

@Rhayader

9k a year is a lot on a 600k house. Much more than is being proposed for the UK. That’s 1.5% a year - the proposal for the UK was an annual tax of 0.48% on the value of your home or 1% for second/third homes

The fact that I can deduct it from income on my federal taxes makes the net cost about $6k. They're higher than many other areas because my town has outstanding schools and spends a lot to fund them. That benefited my DC greatly. They also pay for local police, fire services, trash collection, local libraries, etc. That may make them comparable to your council taxes. You're paying for those services somehow.

@HikeForward

I think it would be ridiculously unfair. As if we don’t pay enough tax!

It’s as if the harder you work, the more you study and save, the higher you climb up the career ladder, the more money they take away from you.

People should be allowed to keep their assets and income, not give more and more away in tax.

Listen to yourself.

Who paid for your education? Your healthcare? Your children’s education and healthcare? Of course you should pay tax on the money you earn and the more you earn, the more you pay. Paying tax is paying your dues as a citizen, not giving it away.

It would be a right pita to value everything for this, similar to doing valuation for Probate and inheritance tax. We would fall below the amount but would probably still have to do all the valuations to prove that we do.

@MissConductUS

The UK has the furlough scheme and a while host of state support for the pandemic that the US has not done. This needs to be paid for somehow! It would be lovely to spend it on schools but saving people’s jobs is also a good cause.

@Rhayader

My federal taxes will very likely go up this year or next because of covid related spending, which I am fine with. Just at the federal level, the US has spent about $2 trillion on covid relief, with more to come. So support has not been miserly here.

@RedRiverShore

It would be a right pita to value everything for this, similar to doing valuation for Probate and inheritance tax. We would fall below the amount but would probably still have to do all the valuations to prove that we do.

yes, and that's why it's my belief that such a tax only needs to address the two asset classes holding 77% of the weath.

Property and private pensions.

However, the inaccurate scare story leaked to the Tory press seems to have achieved its objective of creating enough public opposition to protect the richest among us from having their fingers prised away from a fragment of their wealth.

@HikeForward

I think it would be ridiculously unfair. As if we don’t pay enough tax!

It’s as if the harder you work, the more you study and save, the higher you climb up the career ladder, the more money they take away from you.

People should be allowed to keep their assets and income, not give more and more away in tax.

Yes it disincentivizes and it often hits those hard who are just about surviving or who are prudent

Yes house prices are insane.

Ours has gone up to 3x what we paid for it, 14 years ago.

Thing is it's only real money if you can sell. And house prices can go down.

So you could charge this tax and then have a property crash (anything could happen what with Brexit + Corona) and the loads of the people who paid don't have a house anything like that value any more.

I'm sure there's better ways of raising money.

This would affect us but honestly I would support it. We can’t leave the poor or our kids to pay for the borrowing.

Could we afford it? Ish. Also as a high earner who have assets (even if they are cash poor) even if we had to take out a loan it would be at a much better rate than someone on a lower income. And if we didn’t want to take a loan we could ask parents to help out in the short term.

Hard work doesn’t automatically mean more money. Yes I work hard but I’m also incredibly privileged which has enabled me to get to this point.