'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?

I'd love to know who is going to value these houses if they were bought fifty years ago.
I understand that data will be available for new purchases but this will take a whole task force of what? Estate agents, Rightmove moonlighters?

Fwiw I live in a £700k house and I'm downsizing due to ill health. Do I want to? No because it's costing £40k to move but we can't live here without my income.
Nobody is helping me although I'm seriously ill.
I'm sorry op that your mum is unwell but I'm sure there is a more accessible, safe property near by.

The difference here is principle residence doesn't attract IHT (to £1m) but savings in the bank do. Many potential heirs keep their elderly parents in the family home to avoid paying on the first lot of money.

We are paying £1,700 per month for a £2.5M house with £800k interest-only mortgage.

Yes, we have a large mortgage but as an investment it's still a good deal as the % of the value it goes up is obviously larger on a big house than a smaller one. We will obviously need to downsize (and pay tax!) when the time comes but that was always the idea.

We still pay less than we would for a 2-bed rental property in our area but instead we have a large house and garden.

But we don't have any other savings, apart from pensions. We're not 'wealthy' in the sense that we have lots of money left at the end of the month.

So not loving the 'mansion' tax as we are already punished with higher taxes.

I think people who live in shitty areas where you can buy a nice house for £250,000 because hardly anyone wants to live there just aren't going to "get" the challenge of buying a house in London.

She can sell it or release equity from it so no she does not need to die.

She does have the money - it is very easy to arrange EQUITY RELEASE. For the love of God. She signs some paperwork, releases a tiny percentage of equity from the house and hey presto - she can live there as long as she wants to. No move required. Her descendants will then inherit a smidge less - this is what all of this is really about.

I'm as old as a dinosaur, I remember the poll tax. I had to suddenly find £2k or face going to prison. In a band A property.

It could be much worse OP

I think it’s unfortunate if she has to move but it’s not a tragedy.

I very much doubt most elderly people who have lived in their £2m+ houses for years have a mortgage. And even if they do, it is still possible to release equity - we are talking about a tiny percentage of the total value here. And in any case, it sounds like there is the option to defer until the property is sold, so it won't impact the person living there - just the people inheriting the £2m+ house.

It'll never happen, There will be an election before then and it will be changed.

It will be like any other bill you can't pay. But can't see this happening.

I'm sorry - nobody "needs" to spend over £2m on a house in London. We sold ours recently for £1.75 and it was a 5 bed in a great area. If you can afford a mortgage on a £2m+ property, you can afford this tax. We will now be liable for the tax in our new home and I say bring it on - we are fortunate to still feel comfortable despite the cost of living crisis, so we are the right bit of society to be squeezed. Will we feel it? Yes. Is it anything at all like having to choose between putting the heating on or feeding your kids? No.

I'm surprised there isn't a London weighting. Start at £2m outside of London, start at £3m in London with a much higher whack or extra band above £5m given the insane pricing in parts of London.

I take your point that people have inadvertently crept into this bracket by being asset rich, cash poor but that is the whole point of a wealth tax

Does this hit farmers again?

You could use the same argument to say that someone who has £2m is a stocks and shares portfolio “does not have £2 million” as the companies could all go bust, or war could break out and the markets tank.

This is essentially what Elon Musk says, that he doesn’t have loads of money as it is all tied up in stocks - and yet strangely he is able to then borrow against those stocks to raise the cash that allows him to live like a billionaire.

That’s how he and billionaires like him avoid paying the income tax that the rest of us have to pay. They don’t receive “income”, they borrow against stock and say to the government “you can’t tax all this money I’ve received and which I’m using to buy yachts and houses and Patel Phillipe watches as it is actually all just debt!”

When you think about it, even the value of a person’s cash can fluctuate (hyperinflation could rob it of its value), so I think we are on safe ground when we say that a person with a £2m house does in fact have £2m of wealth.

I only own a 2-bed flat, but it has gone up in price massively just in the 12 years since I bought it, and I couldn't afford to buy it now, even though I'm in the same job, and have had pay-rises in the interim. So I do have a lot of sympathy for people who are sitting in a house that is "theoretically" worth a lot of money, but who don't actually have anything like the cash that people would assume they had by looking at their home from the outside. We also know, because of what happened when they introduced council tax, that the government doesn't have the resources to accurately value all these properties - they won't be checking the insides, the condition, the garden, improvements etc.. It will be a bit of a random mess at any price-point near the band limits, and they certainly won't be re-assessing them frequently enough to keep the system running properly.

She has choices. She can sell and move and you can help her and there will be financial gain.

People like my mum were placed in similar positions due to the bedroom tax and she certainly wasn't sitting on 2 million. She'd have had the cost of moving and the difficulty due to her health which was so poor she died at 56. She was also in a rural town so would have been rehoused to a 1 bed flat somewhere further away as the town we grew up in had only a small handful of 1 bed pensioner cottages.

Anyway she died before it came to fruition but not before it caused her considerable stress.

Sell the house, move her somewhere smaller and more appropriate, move her in with you? Move in with her and coddle your inheritance pot.

She's in a better position than most

I wonder if anybody’s built an AI program to do that
Little clue Yes, they have

£2500 is hardly huge in the context of a £2 million purchase.

Yes, they really really should increase inheritance tax. But it's a real no-go area in this country - too many of the active electorate are older home owners who think they have a god given right to the property inflation they happen to have enjoyed, and believe they "earned" it. They don't understand that there is a difference between working hard to buy their home at the price they agreed to pay, and the dumb luck of being a home owner during a time of massive house price inflation.

But you’re lucky to be able to afford it. What about people on large farms who have inherited the large farm houses (yes we know Labour hate the countryside and anyone who owns any of it- they’ve made that abundantly clear) or the person that has been living in their house for decades?

if someone is choosing to heat the house or feed their kids, they should have made better life choices in the vast majority of situations. Those that have made good choices yet fallen on hard times, eg through illness would be easily identified and given much more help. If you have chosen to have 3 kids whilst unable to support yourself then that person is irresponsible and any money should be channelled through schools/social workers to help the children out of this cycle.

If my very modest house was re valued now we’d have to pay more council tax and we already pay over 2 k a year as it is ( band D ) I just hope that they don’t revalue all the homes to be honest ( and selfishly )
Im surprised it’s not been done though. Must be easier now the values are online for so many properties and they can compare different areas.

Yes - If you are buying a £2m house today, you really don't notice £2500 a year.

Things is - to be fair and ensure it is non discriminatory - they DO need to value all properties. A 3 bed house that was bought in 1981 had an extension and loft conversion and is now 5 bed, 3 bath, with a pool and 3x the square footage may still be languishing in a low band because the bulk of the work was carried out before 1995 under different planning rules or even been done under permitted development so the council is oblivious. There will be lots of properties that should be revalued, which will raise significant sums for local authorities.

I am shocked that revaluation of property for council tax purposes isn’t on the agenda ( or historically)
The uproar over this mansion tax would be small fry to having to pay ( potentially ) double the CT for so many people in normal smaller properties.
It wouid raise a lot of money though.

Yes us peasants in the rest of the country won’t understand the hardship and challenges of having to buy and live in a £2mill house.

@Staringintothevoid616

working farms so will pass this cost onto their customers. It’s really not a valid point