Reeves plan to tax houses over 500k PART TWO

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I am not the OP from the OP!

Usual story.

Everyone : We want better services - the rich should pay !

Government : OK we will do this.

Everyone : No way ! By "rich" I meant everyone richer than me !

Then we get into the hypocrasy of flag waving. Apparently when austerity is done by the Tories it is "evil Tory austerity". Then when Labour get in it's fine.

If someone has £500K of assets they are "rich" by any measure of the word.

I think an asset tax on property of £500K and over would be a good thing and would help bring property prices down. Maybe it would be better to implement on top of council tax on properties band E or above. That way all the documentation for it is currently in place and it would be easy to implement and gain money quickly.

I think we've been telling them that for years anyway.

But nobody is forcing anyone to buy a £1million house, are they? It would be part of the decision-making process when you decide which house to buy.

Agree. But if you live in the SE or London with a family choice is limited for workers

Ridiculous!

If you 'own' a house worth £500k this may well mean for many that they owe the bank a larger percent than they actually own with equity. For millennials this is the most likely scenario. They may well also have little/no pension and very little savings or even be in debt. Their net worth could be as low as £50-£100 k which is significantly below the national average in the UK and yet you pretend that they must be rich because on paper they own a relatively expensive house. I really think we need to focus on educating the population about finances, the economy and how to actually calculate net worth and who is actually rich.

Also the biggest issue regarding affordability in most parts of the country is for houses worth less than £500k and this would actually encourage house price growth for these houses as people would obviously shy away from the more expensive houses knowing that they will be heavily penalised with tax for the rest of their life!

Better services can also be achieved by cutting the welfare bill and reallocating this month. I notice you don't even mention this though.

I think the fact that the house is £600k would be far more of a barrier to low-income workers than an annual tax of £540. Even assuming these low-income people managed to save a £50k deposit, they would be looking at monthly repayments of over £3k. I think the £540/year would be the least of their worries!

It's the principle though isn't it? If you want to live in London then you not only do you get stung on housing costs which will significantly reduce your disposable income but then the government also targets you with what is essentially a wealth tax when you are probably poorer in real terms than a lot of your counterparts that live in the regions and enjoy a lower cost of living. Are we trying to kill the capital city? Are people aware of how much of our GDP comes from London? It is a massive gamble to assume that damaging London will lead growth elsewhere. It may well just lead to us all being much poorer.

It’s not just London either. A lot of family homes in nice towns around the country will be over £500k. The people who want to live in them likely have huge student loans, little equity and are highly educated with promising jobs. We cannot continue to penalise this group for a lifetime

Wealth is subjective to where you live. If you plan to stay where you grew up in London your whole life then your 1m property isn’t going to give you anything other than a home because if downsizing it’s all relative. You then leave it to your kids and they may benefit if they choose to move to a much cheaper area but by that point you’re dead so what happens with the money is a bit irrelevant!!

and this is also going to increase rents across London

and god forbid someone might inherit a property and then have to sell it because they can’t keep up with the costs

The NSW govt (Australia) brought something in like this. It lasted 6 months and then the new govt repealed it.

You could elect to pay SD or pay the new annual charge. I'm not sure if it was always going to be a choice or whether it was during the transitional period you got the choice.

Anyway we chose to just pay the SD. The charge would be on the value of your land which of course goes up whether or not you improve your home, plus they could increase it by up to 0.x% (I forget the details) per year.

We would have broken even in 15 years assuming no increase in value of the land (impossible as it was a huge plot) and assuming the govt didn't raise rates (pigs, fly).

It seems like there are so many better things the govt could do to encourage people moving up and down the ladder, like giving the over 65s a ratcheting stamp duty discount if they replace their primary place of residence from a house to a flat, and/or with a new primary place of residence with fewer bedrooms, with the potential to get a bigger discount if you go from a four bed to a two bed than if you go from a four bed to a three. Am I being naive or would this not be easy to administer where conveyancers are involved as they are buying and selling your houses at the same time and knows exactly how many bedrooms they have).

(No of course I am not suggesting any older person should be forced to sell up but this may take the stamp duty sting away for those who would entertain the idea but bought their house for a song in the 70s and wouldn't mind a smaller place that's easier to heat and maintain but can't fathom paying thousands in stamp duty to downgrade).

Yep, also young families more likely to fall into this bracket. Stretched themselves to buy a family home in a nicer part of some quite average UK towns and they are treated as if they're rich when they may well be juggling childcare costs, a hefty mortgage and student loan repayments.
Edit: sorry just seen we are essentially saying the same

I think it is laughable to suggest that £540/year (£45/month) is going to have a significant impact on someone who can afford a £600k house.

The key words here are "If you want to live in London"; it is a choice. Lots of people have to compromise on where they live to get something they can afford. In fact, pretty much everybody does to some extent. I want to live in a country mansion, but I can't afford it. Who do I complain to?

If you think people who live in cheaper places have it better, then you are free to move there, too.

It is a tax on the buyer not the seller.

No this will be a tax on the seller, unlike at present when stamp duty is paid by the buyer.

But if they are buying a £600k house, they will be saving £20k by not paying stamp duty. It would take 38 years before they had paid more under the new system.

If they moved house again in that time to another £600k house, then they would not be paying another £20k in stamp duty, and it would take 75 years before they were paying more money.

If someone has £500K of assets they are "rich" by any measure of the word.

They're absolutely not. They're quite likely a couple living in a cramped terrace in Brighton, or a young family with a three bed semi in Surrey, paying an eye-watering percentage of their income to a mortgage.

I don't live in London but I recognise that millions of people were born and raised there and have their support network there. This is super relevant when it comes to expensive matters like childcare and caring for our elderly where having family and friends nearby can significantly reduce the burden on the state. We also need people to live in London as it is the powerhouse of our economy and provides a significant proportion of our GDP. It is in all our interests it thrives. It is absolutely not comparable to you wanting to live in a mansion.

It's obvious you live in a cheap area of the UK as you seem completely unable to comprehend what a £500k would look like in some areas. I wonder what people's reaction would be if we automatically taxed the most expensive 50% of properties in each region?

I used to live in a cheaper area and have many friends and family still there. Lots of them have a detached house worth nowhere near £500k and have fancy cars and nice holidays. They also have large pensions. Their net worth is higher than many people that live in the more expensive place I live now. It would do absolutely no favours to anyone if people flooded the cheaper areas. It would cause huge affordability issues in this area for those born and raised there and would kill current economic hubs.

If it's not it should be. An nhs nurse, state school teacher etc gets paid the same in Surrey to Sunderland, but their housing costs will vary dramatically. It should relate to top 20% of houses for that area, or something like that.

That's fine if you do have an asset of £500k . How many of us living in properties have an asset of £500k? Our mortgage lender owns the vast majority of the house.

Absolutely. They are potentially worse off as similar income to someone living in a cheaper area, but more expenses to pay

If they bought a house for £495k they would pay no stamp duty and none of this new tax. The cliff edge is clearly unfair and penalises certain areas whilst almost completely exempting others. Why should someone that can afford a house worth £495k 9@6 anything?

Also, I ask again, who is this new tax better for? The current government will lose out on almost £20k of tax in the very short term so how will this money be replaced. The state needs money NOW not in 38 years. In the long term the household pays more and will be worse off They won't be able to just clear the tax like they can now and truly feel like they completely own their home. There will be a cliff edge in the housing market and people will be constantly worried that the threshold will creep.

But I think this would make it easier for people, not harder. On a £600k house, you'd have to stay in the same house without moving for 38 years before you are paying more than you currently would on stamp duty. Surely spreading the cost over that timescale would be easier for most people than coming up with a lump sum of £20k stamp duty? If you have to factor stamp duty into house buying and therefore take a £20k larger mortgage, you aren't just paying £20k, you are paying that plus interest. The interest on that amount would be more than this new tax!

I can’t quite understand why someone is deemed as “rich” if they buy a £600k house next year (with a hefty mortgage and huge other debts). But their neighbour isn’t classed as “rich” because although their house is also worth £600k they don’t have any/little debt as bought years ago. If anything, the latter have more disposable income and are “richer” by asset wealth so surely they should be the ones taxed more if anyone has to be!

Do you think stamp duty does not create a cliff edge?

@lkjhgfdsa

Surely spreading the cost over that timescale would be easier for most people than coming up with a lump sum of £20k stamp duty?

no. Is it much much more financially astute to pay an upfront one off stamp duty than pay far more over a lifetime. It’s the same as buying a car in cash compared to monthly leasing. The former is far more financially astute to do and will cost you far less overall. This new property tax is Reeves way to keep us all paying for a lifetime guaranteed

You don't have an asset of £500k then, and if you can't afford to keep it then it would be unwise to acquire one. For much the same reason I don't own a Ferrari.