'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?

You are the entitled. Beggars belief people really feel like this. Taxes are for the benefits of all. A safety net.

Currently that wealth is taxed for IHT anyway. This is adding a yearly ongoing amount to that eventual total.

I didnt say it did, I simply found a property which likely represents the size and price of OPs mothers house thats all. Its not meant to represent all 2m houses in London, the thread is about OPs mothers house. We know its only a small % of homes impacted whats your point?

People were talking about the possiblity of these houses being 'mansions' and some posters imply that she is rattling around some massive multi bedroomed house which needs vast amounts of income for upkeep, whereas OP has not described that. She described a 3 bedroomed (with a box small bedroom) house. Thats all.

It’s £200 a month.

Again downsize to where? These are elderly people who need bungalows or specially adapted homes (that aren’t the exploitative retirement flats). People aren’t building the right sort of properties for elderly to move to. So many elderly would move if they could find a suitable property.

Surely equity release is the best option here? No stress about meeting the costs or having to move. She will be able to release more than enough comfortably. Obviously there will still be considerable equity left to meet care costs if required over time.

Nobody likes being taxed. Constantly on Mumsnet people cite living in US or Scandinavian countries as being the ultimate goal because all their public services and childcare options and schooling etc are so much better than ours. Guess what? They are more heavily taxed than us. Personally I think this tax is a good idea.

Er...yes. why would that be an issue? Its the value of the estate that is relevant. (With various caveats). Most people's main asset is their house.

I dont understand your point

To a flat. In a building which has a lift. There are many in London. Pensioners don’t all need a bungalow.
The way people think it’s outrageous that this millionaire should be taxed but are screaming about some single mum getting a few hundred extra just says it all about this country and this site.

Tbh, if I were the OP, I’d encourage her mum to stop rattling around in a house that is too big for her (and it will be too big for one person); downsize into a flat with communal gardens locally, releasing £1m; then she could distribute that cash amongst her grandchildren so that they can get a toe-hold on the property market themselves. If Op’s mum hangs on to this house, when she does pass away £760,000 of it will go to the tax man in IHT, when she could in addition to pre-distributing the first million, arrange her affairs so negligible money is taken in tax on the new £1m home.

If I were OP, I’d be more worried about that impending tax-bill than the deferrable £2500pa that won’t start until 2028 anyway.

And I say this as a woman who loves her own large home but is fully aware that being able to afford to still be living in it in 30 years time - when it will be massively too large for me, likely dangerous to be living in alone or even with my DH in our 80s - is both a privilege and rather selfish. Especially when my children and grandchildren will undoubtedly benefit in multiple ways by a cash injection as early as possible. Yes, the thought of leaving the house where my son was born is tear jerking, but a serious conversation needs to be had with the OP’s mum.

It would be an issue because this is a targeted tax. The aim isn’t to increase tax for the entire population.

Unfortunately she will have to move that’s life. Not like she can’t afford to move.

The calculation of your IHT estate is everything you own including your house. Are you saying that people with £2million in cash should be exempt from any IHT rise and just people with £2million in property?

Yes but you could rent the room out for a grand a month easily in London. Quids in!

Even worse if you have a mortgage. Very unfair and houses real value come down to at the point of sale.

No. I’m saying someone with a £500k house shouldn’t pay more IHT.

A good many elderly don’t downsize, because they live in fairly modest houses that they’re not rattling around in, anyway.

But once anyone has become very old and frail, like the OP’s mother, someone else would almost certainly have to handle the entire thing for them - viewings, estate agents, solicitors, packing up, booking removals men and getting rid of stuff that won’t fit…
A good many won’t have anyone willing or able to undertake all that very time consuming exercise, so deferring will be the practical option.

Goodness knows, moving is stressful enough when you’re reasonably young and fit.

Precisely.

The chances of the next government reversing this are realistically nil. They too need to try to balance the books.

this Isn’t a modest house, it’s a 2 million. Both my parents and grandparents downsized. It’s definitely not unusual. Estate agents can do viewings. Removals can pack. Most things can be overcome if needed. If you don’t want to move there are other options, like I said earlier, you can defer or find other revenue options, release equity or rent out rooms.

But if they are over a particular threshold they will. No matter what the make up of their estate. So they may have a £500,000 house but £1.5million in Rolexs. Shouldn't they be taxed the same?

If you increase IHT it affects all estates, not just those over £2 million.

Exactly - where there is a will there is a way and all that !!

it’s immoral to sit on 2 million ££ of assets and claim UC / pension credits etc etc

the loud voices of umbridge are probably those who stand to inherit said assets …

come on, be honest !

Err. £2.5m buys you a shitty flat like this. Many 3/4+ bedroom social homes in Central London are worth more than £2m.
4 bedroom flat for sale in Raynham, Norfolk Crescent, Hyde Park Estate, London W2

That is why it needs to be regional adjusted to be fair to people. You can live in a mansion with land somewhere shit up north for way less than £2m

This is just another attack on southerners.