'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?

We bought our home just a few years ago (post covid) - in London - and paid £258,000 in stamp duty. THAT was the 'mansion tax' I already paid on my home - a substantial cut into the 'tax free' profit we made on our previous home, which is fair.

I have not made a capital gain on the house since then but I'll be taxed again. Whereas someone with a similar house who has made a huge gain on paper and paid no stamp duty or CGT over decades will be taxed the same as us.

Absolutely, you'd think they'd be sharper after all the fibre in that avocado on toast they keep shovelling down!

Exactly. Glad someone here understands my point.

Won't somebody think of the people with £2 million houses?

It seems to me your friend was very foolish to buy a very expensive house when she has a low income.Expensive houses need big incomes to maintain them. People have to move out of communities they like for financial reasons all the time. It's not really an unusual or exceptional circumstance.

Better start a whip round for them

Reading the runes, I suggest that the costs of owning a house - utilities, maintenance & taxes are likley to rise above inflation

I suggest that buying anything bigger or more expensive than you really need OR can comfortably afford may not be a good move

Thats my personal opinion and any choices you make are down to you BUT I cant see Council Tax carrying on in its current form for much longer and more expensive houses may have to pay their fair share sooner or later

If you could afford to pay £2.3M or thereabouts for the house, you can afford an extra £2.5k per year.

And Blenheim Palace cost £260k to build. Doesn't mean it should be in a lower band for stamp duty now though.

I wonder if places like China have such futile social discourses. No, they work fanatically, build and make things to make themselves and the country prosper. Much as we did not THAT long ago, before all sorts of bs policies and wooly thinking brought us to where we are now.

This is because a staggering amount of the UK's wealth is all being held in London and the south east. Wages are so so so much higher down there and it's not really fair, so this is evening things out 👍
There is nobody out there who lives in a 2 million pound house who cannot sell it if needed. They just really don't want to, which is not the same thing.

Move where though? No one is building bungalows which is what elderly people need. That is part of the problem - I know elderly people who are willing to downsize but can’t find anywhere that is suitable. Some Flats are fine but very isolating for people on their own. Most houses they can’t manage the stairs. Retirement properties are just money stripping scams.

Dead right - the old need small, very small managed flats with lifts. Good luck with that.

I think the council tax problem is a big one. I dont think this has solved it though.

It is unfair that people in London at all levels but especially in million pound homes, pay significantly less than people in cheaper homes around the country. My council tax in Scotland is £4100 annually (£800 of that is water and gas). Im in a bog standard new build, classed as G band and could never afford to buy in London. Why am I paying so much to receive significantly less amenities than those in London receive?

Iv just checked and Wandworth Council charge £1650 council tax for a property in the same band as mine. Westminster Council are much the same too.

I can afford to give yet more of my earnings away (that I've already paid PAYE and NIC on), yes. I was pointing out how illogical the tax is.

It's basically a tax on living in London.

But why? Council tax is an area specific tax. What someone else pays in a different area has no bearing on you. What should I, in London, pay for the bins in Hull?

They’ll likely be able to put a ‘charge’ on the house. So it’s only required to be paid once the house is sold - when they move or pass away.

If that is the case then has the projected revenue calculation been based only upon a usual turnover of homes sold? Or of every home with a value over £2m? Because if it only needs to be paid upon a sale (and a change of government could promise to waive those charges) then it's going to raise the square root of fuck all.

There needs to be an exception for elderly people like the OPs mom, but for people like her friend? Well I'm sorry, they are just going to have to suck it up. The changes will affect less than 10% of properties and of that it will only be a proportion that can't afford the rise.

When the last government put the cap on housing benefit thousands of lower earning families had to move out of the south east because they couldn't afford to top up the rents.

They left behind friends and family, had to move jobs, their children had to move schools. A massive burden was put onto services in the midlands, north and Wales as people relocated to areas where rents were cheaper - particular on children's services that were already being stripped to the bone and on councils who were having to support more and more people on housing and council tax benefits.

The actual benefit money for housing benefit and council tax benefit is re-imbursed from the government, but the administration costs aren't, and the increases directly led to staffing pressures and cuts having to be made elsewhere to meet the demand.

I have masses of empathy for anyone who is affected by this on an individual basis but as a policy, its not the worst thing she's announced today and it will affect far fewer people, and far fewer families living in poverty compared to the previous governments actions.

Erm, actually, it’s not that easy to sell a £2m house because there are not that many people looking to buy them. It’s not like you can go to ‘we buy any house’.com on Monday and walk home with the cash in the bank.

The higher up the price chain you go, the fewer buyers there are. I live in an area where there are plenty of those properties. They sit on the market for over a year or more, on and off the market often, even if they are a distressed sale. Even fewer buyers now given many of them have/are leaving the UK.

@BloominNora there is an exception for people like OP’s mum. The debt accrues, attached to the property, and it is settled when it is sold/she passes away. Assuming that is 10 years away, that a debt of about £25,000 plus interest. On a 2m sale that’s a paltry amount that OP and fellow heirs will just have to suck up when settling the estate.

Actually wages are not all higher down here. That’s just hyperbole and an easy way to justify the unfair taxing of people in the region. If you’re a public sector worker, example, it’s pretty much the same. When I was teaching in the south east, my fringe allowance amounted to an extra £500 per year!
And when I’ve been on holiday, it’s the northerners who’re flashing the cash as often their living costs are much lower.

@ joanofaardvark Good point!

Most people will pay it though. The ‘charge’ will be an option to those that really can’t. They’ve done this in the past for Legal Aid. My mum couldn’t afford her divorce costs so they charged it to her house and claimed it once she sold. I’m assuming they’ll do the same for this tax if needs be.

An elderly lady who has lived somewhere for 50 years should not have to just sell up and move. Don’t be a dick!

Fair enough then - absolutely no different to social care deferred payments - which affects everyone who owns a house, not just those in £2million+ houses.