'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?

This. The people are feel sorry for are the young who work all hours and can’t afford a modest home for their family. Not pensioners who have had the privilege of living in large luxury homes for the past 50 years!

If your house is worth 2 million but for whatever reason you don't want to downsize then you will always be able to borrow against it

You say they can’t sell up and move, why not? That’s what many in houses worth much less have to do if they can no longer afford to live there, whether they want to or not. They’re sitting on two million. They’ll be fine.

The mansion tax is not going to trouble me but I have to say that some of the casual responses on here are a bit sickening.
Are we really the sort of country that thinks that people who own their own homes outright and have lived in them for many years don’t have a right to live in them?
“They will just have to move” indeed.
Uncork that and some future chancellor could just breeze in with some brilliant ideas and make it so that any one of us can no longer live in our homes.
Homes and houses are different and should be treated as such by the tax system.

It's really sad but as others have already said may be the lesser of other evils like the NHS going bankrupt.

If I were the daughter in this situation, I'd aim to do it via equity release so that my mum didn't have to move. If the house is worth £2M and she has been in it 50 years presumably it is £2M of capital? In which case you are effectively taking it out of her estate, assuming you would expect to inherit her house when she passes.

There’s people who can’t afford to put the heating on or feed themselves!

This

Why can't they just stop giving money to all the people that don't work and feel entitled to keep having kids they can't afford? Not sure why people who worked and bought their homes should be punished always....

Rubbish. We live in a house in London that’s just shy of £2million. We’ve lived here for 25 years as have 2 of our neighbours. The others ( we live in a row of 5 houses) have lived here for more than 10 years. We are all good friends and have a lot of time for our elderly neighbour, who is over 90, and check in on her regularly.

Please don’t tar all Londoners with the same brush!

Many, many vulnerable people who are renting or on low incomes are expected to move house at the drop of a hat if they can no longer afford their accommodation.

What makes your mum or your friend any different from anyone else's mum or friend who also love their homes and neighbourhoods?

Possible for some but in the specific example the OP gives, her parent would find it very difficult to rent somewhere, probably needs ground floor, would need to prove a reliable regular income, not possible if you are working on savings interest, in competition with lots of other people wanting to rent (there are huge gaps in the rental market its very hard to find a rental now that landlords are selling up). If you're a family with kids or pets, very difficult to find a landlord to accept you in competition with others who wont have that factor, Landlords may not be able to say they wont take on that basis but they'll just filter out the potential renters they dont want and that will include people with young kids and pets. Its actually very very hard to find rental properties now.

Sadly I struggle to have much sympathy for the wealthy when there are kids in this country that don’t even have a bed of their own

OP can pay for it in that case and take it out of the massive inheritance eventually coming her way. Or help her downsize.

And the single mother will need to find a cheaper house.

It's really not complicated at all.

Well, in a word (or 2 words) ... that's what equity release is for.

I think a part of the problem with our economy is elderly people sitting on huge assets and not able to release the money to spend it on themselves. (I have the same issue with my elderly mother btw).

Another problem is that there's far too much emphasis on taxing income. We need a range of different taxes to spread the load more - and taxing property is only fair.

OP your mother DOES have options. She could sell up and downsize (though I do understand why you don't like that option). She could take a lodger (again undesirable unless a family member). She could sell a part share in the house to you or your sibling (enabling you to get a mortgage to free up some of the equity). Or there's equity release.

A session with an independent financial advisor would probably help you navigate all this.

It’s a stupid change. I don’t own a £2m house, but disagree with this.

A £2m property is going to be paying top rate council tax, why should there be further costs to someone who has worked hard to afford that property. Some one who’s worked hard to earn a £150,000 property may earn more than the other.

It’s a “you look like you’ve done well, I’ll have some of your pie scheme”. Utter rubbish.

Sadly as usual my opinion will mean nothing to this government; and it will lead to them needing equity release or similar, where they are forced to dilute their assets.

They could always offset it by having lots of children and making the most of the benefit cap! (A joke - don’t shoot me)

You monster!

I guess I see both sides. I can see how important

NRTWT
But nah, you get the tiny violin from me on both scenarios
If you’re poor, take in a lodger or sell up and live by your means like the rest of us plebs.

Even in London, a £2 million home is pricey. These homes were pricey 30 years ago: they've not shot up in value overnight. If the "friend" bought a house outright 15 years ago that's now worth £2 million, that was an expensive property then.

I think the amount of breadline pensioners/single mums who happen to be living in very expensive houses is relatively small. Doubtless, certain papers will flush them all out to look sad. I think it's fair to tax gains on assets.

It's stupid, it really doesn't benefit anyone.

People having to move when they are settled in a community for many years, because of a cancerous real estate sector and therefore taxes on the property, is just part of a sick economy. The houses themselves haven't changed, they weren't modest houses that magically transformed into "mansions". They are still modest houses, that are over-valued.

The people who benefit will of course be the rich, who continue to drive those with modest incomes out of the communities they have built.

I lived in the U.S. a number of years and property taxes were based on value and after Covid when home prices suddenly sky rocketed we knew several people that had to suddenly sell and downsize as they could no longer afford the property taxes. They all did make off with about $200,000 extra equity. Homes were $150,000 when we moved there and selling for close to $400,000 when we left. We stupidly had rented 😭

Did you even read the whole post?

I’m sorry but I just do not have any sympathy for someone living in a 2m house. Personally I think she should have gone further on taxing wealth and assets.

We all know that in many ways Britain has become a harsh place to live. Right now Labour gets the blame, previously it was the Tories.

My point concerns Council Tax, which is very low, and this ‘Mansion Tax’. Excuse the comparison, but before moving to the UK (with my British husband, for personal reasons) we lived in a ‘purple’ city in a purple American state. (‘Purple’ states are the politically moderate ones) The local property tax was just over 2% the assessed value of each property, annually. But in return we had top notch schools, libraries, police, ambulance, fire and other public services. Our city was beautifully maintained, public housing was good, public transport was excellent (a rarity in America), etc.

In my area police and ambulance responses are almost a lottery - I think they are doing a pretty good job considering the limited resources - good teachers, are dropping like flies from exhaustion, waste and recycling pickups have been stretched to the limit, etc.

If we want services, we need to pay. A 2% tax on a property worth £2M would be £40K pa so the present plans seem quite reasonable to me. However I understand that the transition is difficult for some. Assistance is necessary.

Once a new system is established, you price tax payments into your housing costs and it is fine. For us the quality of life was worth it.

If there was a motorway planned and an old 90 year old's house , that had been a home for 50 years, was compulsory purchased would you have sympathy for the home owner or simply tell them to suck it up? Just because a house is worth x amount doesn't mean they are somehow unworthy of sympathy or understanding. Also a house is only worth what someone is willing to pay. It might be valued +£2 but what would it actually sell for? House valuation is not an exact science.