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

@Marinaloves

Equity release schemes are an absolute scam and inappropriate for the vast majority of homeowners

I’m not sure if you understand how they work, or understand what compound interest but I can think of few worse ways for a middle aged couple of raise money.
It would be cheaper to put it on a credit card than use equity release.

A 40-something couple taking out £25k with an equity release scheme could well end up owing several HUNDREDS of thousands by the time they die

If that is honestly the best case you can put for why this tax should happen, we can all safely say it’s not going to happen
No one with a grain of financial understanding would promote the idea using equity release as the method to support it

Families are coping with massive stress already. This would be political suicide for any party stupid enough to adopt it.

My situation is I (single mum) own a house with mortgage. I've been redundant since last March so I couldn't raise £25k in any legal way.

I could try to sell but if everyone else was doing the same, the market would crash. If it crashed by 20%, I would no longer be liable. So a self defeating policy.

@GappyValley
You do realise I said run by the government not some equity release scheme.
Like they do now! With no interest. COUNCILS DO IT ALREADY
Bloody hell.

@marinaloves
I dont need much, i managed on simillar amounts saving crazy for what I own. So yes, I would get my 20k back in benefits and then move out of here to somewhere where hard work is valued.

I already pay 40% tax, so no thank you, not happy to pay more for covid on top fare increases, food prices going up and god knows what else is coming.
Maybe only the ppl on fourlough should worry how to pay it back?
Or maybe only footballers should just give half of what they own, just like that, why not?
Or anyone who has any spare cash in savings account should just donate half of it

Could you imagine Labour bringing this in?
The daily mail etc would go nuts!
' communist state ' springs to mind...

This would be silly. In the town I live, there are zero houses worth less that £500k. A 2bed terrace is £600k. So, no, people won't have £25k spare. It's also totally unfair south vs north.

@QuoteBootsieBarnes

Cheer up, newspapers don't make "proposals"

You are talking about a rumour of a new tax.

Most of the wealth in this country is in the form of property and of pension schemes.

These two asset classes have the advantage of being very difficult to hide; very difficult to smuggle overseas, and woth a huge amount of money.

So good targets for tax.

The tax band you mention, and the tax percentage, are unrealistic.

Therefore, the objections raised are unrealistic.

You are just being softened up for the idea that the wealthier occupants of this country are going to have to pay a bit more tax, probably on things that are currently untaxed, and are worth a great deal of money. Which, perhaps, is not a bad thing.

We live on border of Greater London in a modest 3 bed semi and would have to sell our house to pay a £25k tax bill. In fact, my DH doesn't even earn £25k a year before tax- he earns just over £21k. We wouldn't cope with much of an increase in our council tax payments either- and before anyone says oh you shouldn't have taken on such a big mortgage etc. when we bought the house we were childless, I was working full time, and DH was in a job paying £10k more than his current one. He was made redundant whilst I was on mat leave and has still not managed to get a job paying anywhere near what he used to earn.

@Marinaloves

Umm, so let me get this straight...

The government desperately needs billions of pounds.
So to achieve this, it sets up a scheme to put together a pot of money, to lend money to homeowners so they can give that same money straight back and in exchange, gets a promise to be paid back without interest when the homeowner dies..?

So the government is so desperate for my £25k that it lends me £25k to give back to itself and has to pay a load of staff to run the scheme, AND when I pay it back in 40+ years when I die, inflation means that £25k is the equivalent of about £10k

Do you see a teeny tiny little problem with your idea..?

Someone up post said leaving out primary residence and pension pots prior to coronavirus but taxing assets other than that over 200k would make it easy for people to hide money.

Forgive my ignorance here, but how? Surely if you limited it so people were not able to put more than they did pre-coronavirus into pension pots, that would avoid hiding money there? Count all other assets including shares, property portfolios etc.

What am I missing?

inheritance tax always seems fair enough to me - there is an exemption between spouses but once both are dead, the money isn't needed by either any more. We're quite happy to make a contribution to the national coffers once we're gone. I haven't paid income tax in years as don't earn enough (even without deductions) although like everyone else I pay VAT, insurance tax and so on.

Workable corporation tax would also be good - Amazon, Starbucks, Costa etc etc etc

I think it's a great idea. Also, I hope he is proposing to identify the huge- billions in profit -business, not the small ones that have struggled, but the supermarkets, amazon etc who have made billions from the pandemic and ensure they are taxed fairly. That is EXACTLY how the deficit should be met.

@Marinaloves

The council schemes you are talking about are specifically to stop people going into the care homes

So the council spends £10k modifying a house to have a walk in bathroom, new boiler etc which allows a person to stay in their own home, and that saves the council £30k a year not having to put them in a care home

And the council adds a £10k charge to the house so when the person sells up or dies, the council gets its £10k back

That is absolutely nothing like a proper equity release scheme, and I also can’t work out how it would work on a national scale, for a skint government

You are basically proposing that the government gives a free loan to people to give that money straight back to the government

No actual new money comes into the system. It just goes around in a circle with added admin costs, meaning the government is far worse off than not doing the scheme at all

The idea that the tax will start at about £500,000 is I think unrealistic, and us not supported by any evidence.

The same for the idea that it will be a 5% rate.

These figures are just thrown around to frighten people and create a straw man to build opposition.

It is instructive to remember that the mass media in this country is almost entirely owned by multi-billionaires and their dynasties, who are surprisingly reluctant to pay tax in this country.

How would it work? How would they know how much each person is worth? I'm inclined to think that the very rich would simply find ways round it with clever accounting and trusts etc? Or people putting property and investments into childrens' names?
£500k does seem very low if it includes house value of your home and pensions etc.

@Thislittlefinger123

How would it work? How would they know how much each person is worth? I'm inclined to think that the very rich would simply find ways round it with clever accounting and trusts etc? Or people putting property and investments into childrens' names? £500k does seem very low if it includes house value of your home and pensions etc.

Yes, and there is no reason to suppose it is a realistic figure.

So say your house is worth 650k you paid 350 profit of 300k
You will have to pay £7,500
Are you actually serious that you can’t afford that with roughly 300k sitting in profit. That’s considering you have a mortgage of 350
If you’re actually sitting on 650k then are you seriously saying you couldn’t afford 7.5k to save our country and it not be totally fucked up for the young

But to be able to access the 7.5k would involve selling the house if not enough money in savings to pay the bill and still have enough savings to be financially secure. Nobody should have to sell their house to afford a tax bill that they received because of their house. That's forcing people into worse situations just because they have bought property that has increased in value. High value property doesn't mean people have a lot of cash hanging around.

If we exclude family homes the price of family homes will go up even more because it’s a way to hide money from the tax man. Further locking out young people from buying a house.

A percentage property tax on the value of your home each year OR paying capital gains tax on the increase in the value of you family home would stop house prices getting even further removed from what first time buyers can realistically afford. It’s ridiculous that you basically need your parents to pay your deposit if you are buying in the south east now.

I can't imagine the Tory party ever imposing a wealth tax.

Equally, I can't imagine how we're going to pay back the cost of the pandemic.

Good job I'm not chancellor...

@kingat

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?

I really don't think many people would be as stupid as that though so I don't think it's a big thing it factor in.

Marina, not everyone has ‘profit’ in their house. That’s a very big generalisation.

A percentage property tax on the value of your home each year OR paying capital gains tax on the increase in the value of you family home would stop house prices getting even further removed from what first time buyers can realistically afford.

What sort of percentage though? My flat is worth around £260k and even if it was 1% I don't have a spare £2.6k sitting around to pay on top of the extortionate council tax I already pay for sod all.

It is a stupid idea and billions will leave the country overnight and the pound will crash even more. All the super rich have accounts in Switzerland and offshore and will leave or find a way round it. Better to add a bit of extra tax on lots of different types of taxes. Perhaps also capital gains tax (not too high) on main residences if you sell it and don’t reinvest the proceeds within x years into a new house. Wealth taxes are quite hard to administer especially if you don’t have a population already filling in self assessment every year.

@tilder

I can't imagine the Tory party ever imposing a wealth tax.

Equally, I can't imagine how we're going to pay back the cost of the pandemic.

Good job I'm not chancellor...

Consider the possibility that you lived in a country where wealth is not taxed

And that the country has total wealth of £14.6trillion

And that Property and Private Pensions together comprise 77% of it

And that about half of it is held by the wealthiest 10% of residents

And the country needed to raise some tax.

1. what options might you consider?

2. how much would 0.5% tax on half the total wealth bring in?

Nearly every house in our area is over 500k, we bought ours a long time ago as a doer upper. We'd be stuffed if we had to pay 5% of its value - it would be more than a years wages, and certainly not doable in one go.