Reeves plan to tax houses over 500k PART TWO

[soupyspoon]

I am not the OP from the OP!

Nobody would under the proposed system.

No there is a separate proposal to replace the council tax. That also gets explained in the link I posted before.

Theoretically they would. Just every year whilst they live there. So rather than a one off tax on sale it’s a bigger bill spread over the years

If you already live in the house, you won't be paying any more tax on it for being over £500k. If you move house and buy another for £700k, you would pay the new annual tax of a few hundred pounds instead of stamp duty of £25,000 when you make the purchase.

If you move house a few times it wouldn't be a bigger bill though. Currently, every time you move and buy a £700k house you pay £25k in stamp duty. Under this system you would just keep paying the annual rate when you moved. And if you downsized to a house less than £500k you wouldn't pay at all.

So as opposed to paying stamp duty once which is often factored into the one large occasional process they want to shaft you yearly to make this charge part of your regular outgoings. One would assume they will also recalibrate your house price yearly so any improvements you do will see you charged more and if houses prices go up, so will the charge. It’s a little like an ever tightening zip tie.

Well, this was the person who made the proposal talking about it, so straight from the horse's mouth.

You have absolutely no idea what the yearly charge would be. In the article they talked of it being dependant on how far over £500k the house was. So an ascending scale and on top of council tax which will increase inline with inflation and be called something different.

Other areas are available.

Lots of people commute from where I live to London. DH did for years working in the City (not a banker). We live in a large 5 bed detached house with a garden and double garage in a nice areaand our house is not worth £500k.

Yep and those that can sit smugly thinking that their house is worth nowhere £1.5 million currently should consider what's happened to income tax thresholds that haven't changed for years and trapped more and more people in higher tax brackets. That's the best case scenario! Worst case, once the idea is established then they actively lower the threshold to make the system 'fairer'.;

Probably daft question but how will they determine how much your house is worth? Is it simply what you bought for it (and in which case won’t this stop people moving) or will they predict how much a home is worth based on market value?

And if they are taxing things on perceived market value doesn’t that open them up to tax more on market value too?

Yes, the example given on the radio by the guy who made the proposal was someone buying a £600k house would be paying £540/year instead of £20,000 stamp duty up front.

It is a tax on the buyer not the seller.

Yes, but I think less off-putting than stamp duty? For a £600k house, you would pay £20k stamp duty; under this proposal, you would pay £540 annually instead.

Headline I saw clearly said RR is planning to scrap Stamp Duty and replace it with a property tax paid by sellers

It is proposed to be 0.54% of the value over £500k. The example given was for a £600k house. Currently, you would pay £20k in stamp duty. Under this system, you would pay £540 annual tax and no stamp duty.

If you moved to another £600k house a few years later, you would currently have to pay another £20k in stamp duty, but with this system, you would just continue to pay the £540 annual tax.

Not accounting for the inevitable % increases and

Higher priced properties of course will be far worse

Sorry if I'm being a bit thick but how on earth would this not just create a huge financial headache for the government in the short term? I understand in the long term people will pay more but if this only applies to people that haven't already paid Stamp Duty then it will only impact people currently buying a house who will pay hundreds instead of many thousands in the year they buy the house. This doesn't seem a great strategy for a government that is pretty urgently in need of cash.

and another said if you’ve paid stamp duty already you’ll be exempt
and
another said it’ll be taxed yearly on the buyer
so
???

I am horribly confused.

@lkjhgfdsa but it’s not as good as it seems. Yes there’s no stamp duty so no one off big payment at the start. But the annual tax will be for the rest of your life. I’ve worked it out, it will take us 10.5 years to break even if the Onward paper is implemented. BUT we would be paying the annual tax for our lifetime. That could be another 40 years for us. So we would massively be losing out. It’s the same as student loans being a graduate tax or buying a leasehold. You’ll never really own your home, even when mortgage free as you’ll always have the tax to pay. What will people do in retirement? BTW a 2 bed house within 20 miles of us is more than £500k, so where will we even downsize to. Any by then, inflation would have lifted nearly every home above £500k anyway so there’ll be very few homes where this wouldn’t apply

Good point, unless you’re downsizing? Would this not lead to a lot of older people keeping their large homes as they wouldn’t want to pay the tax, which is a problem now to be fair but I imagine for different reasons!

Agree
Dh and I fast tracking maintenance to move asap

But are we basically telling lower income workers that they can’t live in London?

why is there an idea that London isn’t a living city with locals who have been brought up there and want to stay there

I've seen it described like that, but it would be the person living in the house who paid the tax.