'Mansion tax' - what if you just can't pay it?

[shellinthesea]

My elderly mum lives in a London house worth about 2million. She's been there for over 50 years, and is physically and mentally fragile. There is no way she would EVER want to move, the house and her neighbours are her whole world. She has no spare money - at all. (Neither do I, before anyone suggests this!) How is she supposed to manage this? It's not exactly her fault that the value of the property increased so much since my parents bought it all that time ago.

I also have a friend, also in London. Both parents sadly died in an accident about 15 years ago, and she used her inheritance to buy a family home which has also increased massively in value. It's probably also worth over 2 million now! She's a single mum on a lower income with 3 kids who very happy at their local school and within their community - what's she supposed to do?

It's just not as simple as 'you live in a high-value house, you can obviously afford to pay several grand a year' as RR seems to think. And for anyone who is about to say 'oh tiny violin, their houses are worth two million' - both of these situations are complicated and quite sad in many ways. Neither my mum nor my friend can simply just sell up and move...anyone have any thoughts on this?

That's not a good analogy. If you buy a takeaway or a pair of boots outright (not on credit), the shop owner won't ask you for more money years later because since then the price of those same boots has gone up.

The reason why many houses have increased in price over the years is by public investment in schools, infrastructure etc. it’s only fair that taxpayers get some of the gain back, via this tax or IHT (or both).

I do feel for your mum, but equity release would solve her issue.

A quick Rightmove search suggests that there are currently 7600 properties for sale in Kensington or within a mile at under £2 million

So why can’t she do equity release? It’s seriously a no drama issue. She doesn’t need to think about it.

She might not have asked for prices to rise, but rise they have. She (and at some point you) has done very well out of it, and will still do very well out of it however she pays this increase. It's spending a little more of a vast unearned wealth. You don't have to like it, but she can pay it and won't suffer for it.

I don’t see why the charges can’t be ‘rolled up’ until the house is eventually sold, or funds become available.

Those are two contradictory positions. If someone doesn't save and the pension is means tested they will get it.
If they did save they won't?
Either way, you sound fucking bitter.

She doesn’t have to be forced to sell up. She can do equity release and it doesn’t need to worry her in the slightest.

Her beneficiaries will have to accept that there is less in the pot.

All these portraits I’m being drawn of little old ladies are really covers for grabby relatives viewing the home as a hunk of cash.

It's really expensive but YOU didn't necessarily spend £2m on it - you maybe spent £150k in 1990 and factors completely out of your control have made the house inflate. Nobody I know in London could afford their own house if they bought it again today. It's not your fault it's really expensive and your income will not at all necessarily reflect these huge prices.

How have they done very well out of it? Nothing has chance for them. They have continued to live in the home they bought in exactly the same was as someone who bought a house in a different area that didn’t have a massive increase in prices.

The house is only worth a house until it’s sold, at which point it was taxed according to value anyway.

How is it supposed to be paid without selling if income has remained the same? There is suffering involved in being forced to sell your home and move when you don’t want or need to. Are you really so mall minded that you can’t see that it is detrimental to some people?

For everyone saying sell up, aside from all the rxamples OP has given who will want to buy a £2m house knowing you’ll pay more CT? Presumably the same demographic who would be on the market for said house will be looking at houses costing less. This isn’t the super rich.

I guess so.

Of course ( some ) relatives only see the money and not the relatives! As mentioned below, I know at least eight or nine people who have had a big inheritance via property. They were lucky the people involved didn’t end up in care homes. These are not people from rich backgrounds, normal jobs and so on, but it has created wealth for some classes of people who never had it before.

Oh no.. won't someone think of all those poor multi millionaires!

What do you mean "how have they done very well out it"? They've got a house worth £2m. That's doing very well in anyone's book.
She doesn't need to move. She can do equity release if she really can't afford it.

have you looked at the Greens defence policy recently.

Me please! I need to get laid!

Well, workers have been shafted already by Labour and continue to be! It’s about time whinging pensioners worth millions were as well 🙄🙄

They are only ‘multi millionaires ‘ because of bricks and mortar. Not their fault at all.
Once you’re in a care home paying 85k plus a year for basic ‘ care ‘ it’s small fry !

Surely it's just when the property changes hands? Otherwise house values are very inaccurate. Our house is worth around £1.6m, but only because we've extended to double it's size. Our council tax band is based on the purchase price, which was a third of it's value now, we're only band F.

I assume they as it isn’t their fault it’s now worth so much you and OP will donate that money when selling to HMRC?
I don’t actually agree that higher values houses should be taxed just because of value as some areas pretty basic homes cost a fortune but OP’s argument is pants.

Equity release is a huge con and we don’t need banks to make more profit out people who are just living normal basic lives.

What tangible benefit do they have from estate agents listing homes like theirs for £2m when it’s still the same 3 bed terrace that estate agent listed at £300k 20 years ago? Nothing has changed for those people.

They started off being able to afford a 3 bed in the area they know and have family, and they can still only afford a 3 bed in that area. Unless they sell, move out of the area and significantly downsize, there is no profit.

Most of them won’t be arsed, complicated & exiting UK if not.

If your mum is that fragile; physically and mentally, it may be time to consider assisted living or care homes, and with a house worth over £2m this will not be a problem. Moving is stressful, yes, but once settled in a more secure environment stress levels will reduce for everyone. Short term ‘pain’ for long term improvement.

As for your low income single parent friend, speaking as a low income single parent, if I outright owned a house worth £2m+ I would sell it and buy something smaller and relocate slightly in a heartbeat. The over all improvement in our lives of not having to struggle financially would far outweigh the stress of moving etc. Families relocate all the time, it’s not catastrophic, new friends can be made, old friendships maintained due to communication technology etc, a better life in a new area is still a better life.

There is a small percentage of people sitting on a disproportionate amount of wealth, hoarding money, whilst others barely scrape by and public services crumble. Wealth taxes like this are long overdue, and this is a good start, but more is needed.

Equity release.