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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Proposed Wealth Tax

769 replies

BootsieBarnes · 30/01/2021 16:11

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

OP posts:
Kendodd · 30/01/2021 17:58

Not true, inheritance tax is calculated and paid before the inheritance is received.
Yes true.
You are taxing the DEAD. The people inheriting don't pay it, its paid on the dead person's assets.

Marinaloves · 30/01/2021 17:59

Why are people genuinely so anti being taxed on what will in the majority of cases huge untaxed property profits ?
Genuinely interested to see why people think it’s ok to make huge amounts of tax free profit and want it to be left alone

Kendodd · 30/01/2021 18:00

I would completely reform inheritance tax and just treat it like income tax for the person receiving it.

kingat · 30/01/2021 18:00

This is stupid, I would just sell what I have, give up my job, pay the tax, give the rest to my mum and go on universal credit for government to pay my rent for next 50 years, how would that make economocal sense?
What is the point of working hard and saving for gov just to take it from me.

I bought BTL last year, rent pays for mortgage, service charge and tax.i make nothing,i add 100£ pm.
In thory that is 250k asset which is not my home.
The idea was that in 30 years my son would have place to live. That doesnt mean I am rich, jist that I work hard.

RavingAnnie · 30/01/2021 18:01

[quote Marinaloves]@RavingAnnie
Well this is why I said upthread that the government would have to run some kind of equity release
They do it now. Social care came and fitted a bathroom for my mum - grant
Re-wiring - not a grant, the government/council will get paid the amount when he dies or the property is sold
How’s that’s so bad[/quote]
Doesn't the government need to money now? Not in however many years time when people die or sell?

In your example. the government is fronting monies for works that they will claw back later.

This situation is different. They have spent money on covid and now need to recoup some of those funds quickly to replenish the public purse?

Veuvestar · 30/01/2021 18:02

Marina why do you keep saying tax free profit?That’s not the case for everyone.
You can’t help your house price increasing, you don’t have control over it

Marinaloves · 30/01/2021 18:03

@RavingAnnie
Well it’s a guaranteed income, isn’t that better. And one imagines they can borrow against the money owed as well
They don’t genuinely need boat loads of cash right now, they need to know they have it coming in.

GoldGreen · 30/01/2021 18:03

@edwinbear the proposal is the first 500k or 1M (for couple) would be exempt so that’s why I said 3M.

edwinbear · 30/01/2021 18:03

@Marinaloves I could accept paying some sort of capital gains tax on the profit we’ve made on our family home should we sell it. Reluctantly, but I could accept it. But being forced into a move before we want to, to pay a huge, unexpected tax bill isn’t right. Our home works for us for so many reasons, it’s our ‘home for life’.

Marinaloves · 30/01/2021 18:05

@kingat
Hahaha
Ok
Sounds sensible to avoid paying probably 20k
You would actually rather live on universal credit??! For the rest of your life
Are you one of those people that thinks universal credit is an easy life!

Pukkatea · 30/01/2021 18:06

@edwinbear yes I think that is reasonable, in particular because it helps with people avoiding inheritance tax by maneuvering the money while they're alive.

Marinaloves · 30/01/2021 18:06

@Veuvestar
Because the profit in your house has had no tax paid on it.

RavingAnnie · 30/01/2021 18:06

[quote Marinaloves]@RavingAnnie
Well it’s a guaranteed income, isn’t that better. And one imagines they can borrow against the money owed as well
They don’t genuinely need boat loads of cash right now, they need to know they have it coming in.[/quote]
How will borrowing against the expected money help? We are already in debt so the money's already borrowed?

Marinaloves · 30/01/2021 18:09

@RavingAnnie
Borrowing Doesn’t matter when rates are so low. Borrowing isn’t the problem paying it back is.
It’s like taking a 10 k loan at 1% when you have nothing but you know that over the next 5 years you’ve got a guaranteed income of 10k to pay it.

KellyanneConway · 30/01/2021 18:11

“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 don’t believe you because the OP sounds like a yougov survey. . But I’ve voted and will comment anyway. This sounds like a lot of tax but at the same time, if a substantial proportion of the population aren’t going to be plunged into poverty due to COVID/ previous austerity measures, and if we want our economy to survive, something has to be done about the equality in this comparatively rich country of ours and I think taxation is the most equitable way to do it .

sandandseashores · 30/01/2021 18:15

The people who were own furlough support should take on the debt - not those who haven't. Those on furlough need to now pay back the temporary support they've received.

Split the debt up in proportion to the payments received.

cyclingmad · 30/01/2021 18:16

The hous you live in should be excluded, that is a house you live in not an asset per se. As for well house price went up sinc ei bought it, well its only paper profit! Which can do down just as it goes doesn't mean you actually have that money.

No way would I want to pay an extra tax on my house just because its now valued higher. What if in 3yrs time the value goes down and i sell up, will I get that tax money back? Heck no.

Maybe they should have been more careful on handing out money or wasting money on technology that didn't work.

edwinbear · 30/01/2021 18:16

@GoldGreen I thought the proposal was that if you fall within the threshold, you pay the tax on your total assets, so not just the assets over and above the threshold? But if I’ve misunderstood I both apologise and am really very relieved.

Nimesh Shah, CEO at tax and advisory firm Blick Rothenberg, commented: “A report from the Wealth Tax Commission suggests that people who have assets as low as £500,000 or £1m for a married couple would have to value their worldly assets including their main home and pension pots, deduct any liabilities like mortgages, and then pay 1% tax on their total assets

heLacksnotluster · 30/01/2021 18:18

This reply has been deleted

This has been deleted by MNHQ for breaking our Talk Guidelines.

GoldGreen · 30/01/2021 18:19

@edwinbear the OP was discussing reports about 5% over 500k. No need to apologise. Frankly there have been several threads recently and all have different thresholds, some suggest primary residence would be exempt etc.

Nancydrawn · 30/01/2021 18:21

American property tax is decided at minimum by state and often by county or town, so it differs wildly.

In most places, it pays for the local education system. This actually leads to massive inequality, where richer places have better-funded schools. (There are mechanisms to correct this, of course, at the state level, but it does sharpen the differences quite acutely in places where this is true.)

In many states in the northeast, the bill can be quite high, a combination of a higher tax rate and more expensive real estate. So, for instance, if you owned a £500k house, you'd pay just shy of £13k a year in property taxes. In Alabama, on the other hand, it would be around £1500 a year.

However, while Americans have a similar average income tax rate, they tax their wealthy people far less than the British. The highest federal tax bracket is 37%, and you only get there at over £375,000/annum. If you were making the equivalent of £50k a year, which in Britain would get you to 40%, you'd be taxed at 22%. (I'm not getting into the states, which have their own rules.)

Conversely, income tax is higher for the very poor. While British people have no tax bracket until £12,500, Americans get taxed 10% on any income at all, even if people make $6000/year.

(I should say this is all for single people. Married households, you don't have to pay top tax rate of 37% until £453,000/annum, while you still have to pay 10% on all income at minimum.)

And finally, the British system has much higher VAT than American sales tax. However, while British VAT is usually zero-rated for things like food and necessities, in some American states, even basic necessities have up to a 10% sales tax added to them.

In other words, while I agree that property tax is a good, non-regressive tax, much of the rest of the American system is far more regressive than the British system.

suggestionsplease1 · 30/01/2021 18:23

@Kendodd

I would completely reform inheritance tax and just treat it like income tax for the person receiving it.
I'm tempted to agree with this approach.

A wealth tax would be very difficult to implement and all the nuances for individual circumstances at the time it is due could make it very hard to bare for some who can't get access to cash, have lost their jobs but happen to live in an expensive area where the value of their modest property exceeds this figure etc.

With inheritance - well no-one is owed that or can take it for granted, or can live their lives anticipating that, or at least they certainly shouldn't be. The inheritors experience no loss with reformed taxation in this area; they just don't experience as great a windfall. The person who accrued that wealth is no longer around to experience the deprivation of assets.

It seems the fairest way to to try raise money, especially as large inheritances tend to (but granted, not always) go to those who have already experienced many advantages in life.

Itsnotlikethiswithotherpeople · 30/01/2021 18:25

It would hit pensioners in the SE (or other pockets of expensive housing) very hard.

bachsingingmum · 30/01/2021 18:26

The report on which all the speculation was based was unsolicited, unlike the OTS report on CGT simplification. There are so many practical difficulties with imposing yet another tax, even putting to one side as others have said it would be political suicide. Other countries that have introduced true wealth taxes have abolished them quite quickly because of the problems.