'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?

Sometimes its impossible to do anything equity release. For example if a house is held partly in trust or has a mortgage.

Be interesting to see how a house where 50% is held in a life interest trust is dealt with by the tax man. Im assuming the survivor will have to pay the lot despite only owning half the house.

Can the people saying moving is so easy tell us if they've actually moved with a house sale recently? My last move, the downsizing everyone one here wants old people to do, was so stressful that it gave my OH a nervous breakdown that it has taken him two years of therapy to recover from and the stress of that triggered an autoimmune condition in me which left me unable to walk without crutches last Sunday, 3½ years later and now a condition I will have for life.

I wouldn't wish a forced house sale and move on anyone.

It's just like leasehold.

And leasehold originated in the feudal system.

Are we going back to that?

Equity release is often a ripoff. Why anyone would do that if they could defer, I don’t understand.

This has to be rage bait? Do you realise how entitled that sounds? People HAVE to move out of properties they love but can’t afford all the time.

This whole post pretty much sums up the boomer generation’s good fortune but failure to enjoy it. Mum’s in a £2million home with lots of possibilities and options open to her but she's not seeing the great position she’s in, she’s nervously looking out there at all the potential problems, feeling worried about Labour stealing her home - presumably because they’ve absorbed the scare stories in certain elements of the press. It’s so sad and frustrating when people with assets of £2million feel like life has dealt them a tough blow.

I mean first question is, if life is so financially hard for mum and your friend they could each sell up and buy a nice property outside of London for £500k leaving a MASSIVE pot of money that can be used to fund a much more comfortable life. Your mum in particular could live like a queen outside of London if she has £2million equity. There are products that could be purchased and ways to structure £1.5 million that might protect from things like inheritance tax down the line while providing a very comfortable income.

The other thing to consider is that a £2million property doesn’t stay a £2million property without considerable maintenance and upgrades to ensure it’s not losing value. Many of us could technically afford a multi million pound property but we’d have to factor in running costs, upgrades and yes, tax.

I mean you do realise that’s why so many commute into London? Whatever your income the choice is always, live in London and have x amount left to live on, or live outside of London and have 3x left to live on. Those who choose to live in London would argue that their home is an asset that will increase in value giving them the long term advantage. That’s probably been true, but to feel the benefit of the asset, you have to sell it at some point especially if you now have less than x to live on.

I don’t mean to be mean but I do find it darkly amusing that the people sitting in multi-million pound properties expect to be treated like that multi-million pound asset doesn’t exist when working out their tax and eligibility for heating grants etc. Yet they would probably be the first to condemn a homeless person or asylum seeker for being able to afford a mobile phone.

Look at it this way; what would you think if a person had to take a low paid job and needed to claim universal credit to cover the bills but they refused to sell their £2million Ferrari Enzo because they legitimately need their car to get to work, and they’re sentimentally attached to the car? That’s how this post looks to most people.

That is true. But equity release is only a rip off to those inheriting, it makes no difference to the person living in the home, like OPs mother.

There are lots of these properties near me and bungalows / flats with lifts are hardly super niche

I agree that there should be (and I think the intention is that there will be) an option to defer it until the house is sold/the owner dies.

But I think people need to realise that the vast majority of property wealth in this country does not come from people having “worked so hard” but because house prices have risen exponentially.

In the 70s, 80s and 90s you could “work hard” and afford to buy a family house, usually on one income, whereas now, no matter how hard you work, a family home in London is out of reach for 98% of earners.

In my street in London (identical terraced houses), the people who bought 20 years ago are black cab drivers, painter decorators and social workers, whereas the people who bought within the last 5 years are lawyers and accountants. Where are the social workers of my generation living? It’s completely unsustainable and something radical needs to be done to redress the balance.

@MyMiniMetro such a double standard as you say.

It's getting old to be told that a whole generation who can't afford secure housing are struggling because of their 'irresponsible choices'.

WTF does it have to do with average mortgage paying Joe or Joanne's responsibility that the Tories handed hundreds of millions to their pub landlords and underwear manufacturers for safety equipment that hadn't been checked once?

Apparently it's too complicated to assign blame for the financial mess we are in where it ought to be, so you know, migrants and avocados, and anyone who doesn't have a £2m mansion should just slap themselves on the back of the hand for being a bit shit. And then they can pay up again.

@harrietm87 same for my childhood road in London & my in-laws. Families with one worker doing a normal job.

you missed out the bit where i said money is just an illusion to keep us poor and under control.

I keep struggling with that same question!

I absolutely consider the value of our house to be part (a large part) of my family’s wealth. And while I have no desire to move in the foreseeable future, knowing that wealth is there has a real impact on the decisions we make, and the options we have. I know that if I absolutely had to there are ways of accessing some of that equity, and I know that it is providing us with a cushion if the shit hits the fan. Pretending I don’t benefit hugely from it would be completely disingenuous.

I’m also struggling to understand why people are happy for Londoners (like myself) to get all the benefit of the house price increases without being asked to spread that benefit around, but as soon as there is a (small) negative consequence associated with those increases you see people shouting that it is unfair, that they are being targeted, that people in big houses in the North of England ought to share the pain! That seems rather lopsided to me - the benefits are all mine but the costs are suddenly “ours”!!

@Nesbi agree, it’s so weird.

Anywhere around here, bungalows are scarce and considerably more expensive than 2 storey properties with the same square footage. A lot were built pre WW2 and typically have rather larger gardens than modern houses. A retired ex colleague of mine managed to find one - a builder had bought it a couple of years previously and just sat on it, while prices went up and up. It needed a lot of renovation, too.

Yeah really 'modest' FFS nobody needs to live in a £2mln house. If they want to and can.afford it that's up to them. But im not going to feel SORRY for someone in this situation. God.

An asset is of monetary value only to borrow against until such time as that asset is sold.

Right up until that point, the house could burn to the floor the day after someone forgot to renew the insurance, Putin could drop a nuke on it, the housing market could collapse, the Yellowstone supervolcano could blow, the world could wake up to the fact that the total national borrowing of developed economies swamps the value of all the assets in the world ...

A person living in a £2m house does not have £2 million. They have an asset currently valued at £2m, the two are not the same. And most people living in £2m houses won't even have that, just an effing great mortgage!

Sell it?
Who will be opting to buy a house with a huge extra payment every year?
The rich ... The very rich ..
People who pee gold.

Im in the NE and dont qualify for the mansion tax (sadly). I do see your point that this great wealth disparity due to house prices going up in the SE but not in the NE is not great. Im not chippy has such but I do feel sorry for young people being priced out now up here due to people moving up here from the south with far larger buying power simply due to their house price going up.

That being said, I still think a tax on something you already own and have paid for is wrong. (Which is why I also disagree with IHT as you should be able to give away what you own without the government pinching some of it).

The exact same people who currently buy £2m houses. Seriously, for people with that sort of budget an extra £200 a month won't be missed. It won't make much difference at all.

This one is a mews house in Kesington. So yeah its not massive (although 1300 square is still loads for a single person) but its a MEWS house in KENSINGTON. Honestly. Normal people can't afford to live in Kensington. Thats just the way it is!

Well the good thing in that case will be that as soon as the property market tanks, the house won’t be worth £2m any longer and will escape the tax. Result!

The property market needs to be checked anyway. It’s currently ridiculous

Just borrow against the house, simples!

Exactly! All this ‘the rich will all leave in droves’ if they are properly taxed and ‘no one will buy the expensive houses because of the mansion tax’ is all bollocks. These sums are insignificant to the wealthy.