'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?

@Snowonground I would get rid of stamp duty which again disproportionately impacts the young and bring in an annual property tax.

CT bands should absolutely be reevaluated.

Im fairly sure many do. You can't be the only economic sage on MN, surely?

I don't know, I'm not a tax expert, but off the top of my head maybe put stricter rules in place that if you want to operate in the UK you have to pay the determined level of tax?

And what is the size of the fee based on? Not on what you use but…the VALUE OF YOUR HOUSE.

Isn't that part of the problem though? That capital gain will never be taxed will it? Sure there will be inheritance tax to pay but the enormous gain the house owner had will not be subject itself to taxation. I think this is just a way to derive some revenue from the house price gains. If wages had gonw up by the same degree the tax take would have been much higher.

Disclaimer - not an economist, happy to be corrected.

You may have missed the point.

@Cantthinkofafunnyusername14 and you think businesses won’t leave? or structure their businesses so they are based offshore?

Did you not see the link I posted to the tiny house in Notting Hill, I wouldnt live there, terrible layout and too small

Well, if it is social housing then unlikely that the landlord (the council) will pass the tax on in the rent then.

If an older person does not wish to defer or release equity, a lodger can be a great option.

DMIL (82) is property (very) rich in central London but cash poor. She has two student lodgers and it has been great for her and them. She is never lonely, someone looks out for her, she feels it keeps her younger and she has made friends from around the world.

In return the lodgers get a Zone 1 room for a bargain and all the Dundee cake they can eat 🙂

Fulham isn't central London. It's inner London.

This is what £2m can also buy.

It's all relative.

https://www.rightmove.co.uk/properties/158930246#/?channel=RES_BUY

I think taxing wealth over work is 100% the right move. Work is what is driving productivity, not property holding, yet working is taxed at 40-45% rate for high earners. Discouraging working at the expense of holding property and wealth is what exactly got us into the problem in the first place
Even people with extremely high (Ie 150-200k, super high in London but nothing crazy in the US) can't afford a 2 mil property whilst paying a massive amount of tax and getting no benefit can't afford this property, so yes, it's wealth.
However the key thing is that she wouldn't have to pay until property is sold, otherwise it would be rubbish.

Possibly. Does that mean we should stop trying though? Not trying is crippling this country. All these corporations making billions off the back of the UK but not putting anything back into the economy and social structure.

No - your arguments are just nonsensical.

@soupyspoon
but London is more than NH.

I think this was suggested a few months ago as it may incentivise older people currently living in large houses to smaller more manageable ones.
They do need to increase the numbers of single level housing at the same time as there is a shortage at the moment.

When working people come on Mumsnet and ask for suggestions about cutting costs etc as they are struggling to make ends meet, they are often advised to downsize or get a lodger. Why should it be any different for a little old lady?

Because she’s deserving poor, innit. Not like these scumbag poors who deserve everything they get, eg immigrants, working class, disabled, single mums. This is a respectable lady so if she wants to sit on her 2 million because she doesn’t want to shell out another 200 a month like most of the rest of the country would have to in council tax, she should damm well be allowed to.
Obviously when it comes to bedroom tax for council housing it’s “different” and those grifters should be turfed out. Who cares if they like living there.

Being old and a widow has absolutely nothing to do with how much money you have, which is the relevant consideration for taxation.

@Cantthinkofafunnyusername14 I don’t think you understand how it works tbh.

Really - you win the most rediculous response of the day

You can defer the tax so not really understanding what the problem is. Or rent a room out. I personally think if your aging mother is rattling around in a 2 million pound house it’s probably time to downsize anyway. Most elderly people do this as a matter of course.

Well it will when the house is sold. If it’s sold for £2 million, IHT will be paid on £1.5 million at 40% so the tax will be £600k.

I disgree that my "arguments are nonsensical" Ive discussed this upthread.

Council tax is different from mansion tax. Council tax is reasonable as it is payable to your local authority for services provided. It may be calculated on the size of your house (which I dont think is good) but its not related to your house. Its for services like bins, potholes etc.

The mansion tax is different. Its basically yearly rent paid to central government for you to continue to live in your own house. It changes the nature of private property. Why should you have to continue to pay for owning something you already own.

I agree it should be taxed. But not as a wealth tax irrespective of ability to pay it, which will also corrupt the housing market, and inevitably lead to very ordinary houses being dragged into it by inflation. The wealth gain does not exist until the house is sold. It should be a tax on the value once the asset has been liquidated and the funds are available.

I would also have preferred a complete overhaul of council tax bands to add a band or two at the top, using relative values of houses in any particular council area, not this South East skewed horror of a policy.

As a first pure wealth tax in this country it has horrible overtones of politics of envy.