'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?

Where did I say it doesn’t need better funding? My comment was in response to a poster arguing that we need the tax to pay for the NHS and prison service. I pointed out that the tax wasn’t going to these things.

@Slinketypokey How do you think families could afford the higher rates of council taxes?

@shellinthesea There are ,historically, cases where some people didn't pay their council tax either because of poverty or sheer cussedness.
I doubt they would send a very old lady to prison.

Every single time someone here suggests that a family who have been housed by the council need to downsize after the children have left home they are told that no, they cannot possibly be expected to vacate their home of many years and adapt to a new one in their old age.

What difference when it's about someone who owns their own home. Suddenly moving is fair game.

The double standards are astonishing.

The problem with xray is that you need someone qualified to request them. It's the IRMER regs.

Not all physios can request them.

Well my main peeve with the budget is that she still hasn't scrapped the triple lock and instead has offered pensioners a larger tax free allownace that the rest of us. And yes I will be caught by the mansion tax....

Yes we're broke but she could have done a lot more with the mansion tax. Why stop at £5m - why not £12k at 10m and £15k at £20 m and £5k for every £10m thereafter? Why not impose a surcharge on mansions that are not occupied by their owner for 183 days a year? Why not impose a surcharge on mansions owned by offshore companies?

What are renters going to do when their landlord charges on the council tax bill?

1 - no old people will be forced to move because of this, worst case is equity release

2 - A £2m asset gives you a hell of a lot of options in life to make sure you land gently (a luxury most people don’t have)

Equity release or move. The thing about owning a £2m asset is that you absolutely can pay. Don't have to be happy about it of course.

Interestingly Council tax in London is often a lot lower than other parts of the country, especially in the well off boroughs with the most £2m+ houses. I own and live in a band B flat in one of the less well off London boroughs and I literally pay more a year in council tax than some one who owns a band F property in Westminster. Let me tell you a band E property in Westminster is almost certainly going to be worth at least over £1M.

Do you think there is a bank account or fund containing everyone's NI payments which build up and correspond to the pension they are eventually paid? Bad luck if so.

The state pension can be changed or abolished by the government if needed. (Unlike public sector pensions which are contractual...lucky public sector workers...).

Agreed. And I also think that there ought to be some age-related discounts.

It's never the owner's 'fault' that inflation has increased the value of their home from when they bought it 50 years ago.

They bought it when they had the income to maintain it (in every sense) and should not be penalised once they are retired (or over a certain age) because of duff decisions by here today/ gone tomorrow chancellors.

Far better to get 1million people (new claimants this year alone) off UC and back to work (or into work for the first time) than grab money from the elderly in their final years.

Yes that's what I was wondering. You can be stuck in a house that is arbitrarily valued at £2m (possibly based on comparable sales in the area), but you can't actually sell it for £2m - either because it's not actually worth that, or because the market has deflated because of the mansion tax threshold. Will we end up with a load of grannies forced to sell up to people who buy their houses for less than £2m, and who are thus exempt from the tax whilst sitting in a cut price mansion?

Meanwhile, Southern grannie moves up north and prices everyone up there out of the market with her fist full of forced sale wonga. She can buy the big pile again, plus a load of buy to lets. Yippee!

I really can't muster much sympathy for folk living in houses worth £2m plus. But I wouldn't be surprised if there was back peddling on this. In zny case the debt might be deferred till the house is sold. Like care home fees.

I can imagine a lot of houses being valued at £1 under £2m!

I love this idea that everyone worked hard and paid their taxes -my mum who is 83 hasn’t done a tap of paid work since she was 48 and has a house worth around£800k purely on the basis of her Hs ( second marriage) high paying career and a nice inheritance back then when homes were much less , I think they paid £198,000 for it - mid 90s - it has sod all to do with being thrifty, scrimping and saving - and I doubt very much she’s an outlier- plenty of people in this position -

I don't see why. Ageism exists. That's not ageism. If you think it is, report it.

For one thing, has it not occurred to you that many people shopping for that type of house will compromise and go for something a bit cheaper to avoid being stung? Even if they wanted to sell up it may not be easy.

Have you considered how these tax thresholds tend to creep downwards? As Labour get more desperate for money they will lower the level of the cap and soon it will apply to all houses.

Then we can all just move, somehow.

If they really have no spare money at all, despite sitting on all that equity, they should have considered cashing out already really. What if the roof needs redoing or the house needs a rewire? They would be stuffed.

Yes, I can imagine a lot of properties that otherwise would have sold for in excess of £2m going for marginally less than to avoid the mansion tax threshold. It's not too different to what happens with properties priced around the stamp duty thresholds.

Worse than that. The NMW is now probably nipping at their low wages.

What's the cut off for repayments for student loans?

@TheNoonBell umm it already does -it's called council tax.

TBH it is not unusual to have property taxes. America, land of the free and allergic to tax, very much have property taxes.

Absolutely this. We are currently dealing with a spiralling elderly lady living in a 4.5 million pound house convinced she will be evicted (by Rachel Reeves, in person.)

The reality is, we will be able to defer the payment until a time when she no longer the house as an asset. Or she can borrow against the house. It’s no big deal.

It will probably means some more forms to be filled in when we are dealing with wills/ inheritance etc. but as we have explained to our elderly lady, she is not getting thrown out on the street.

There won't be any houses on the market for £2-2.5million. They will all be £1.95m or well over £2.5m.
It will only badly affect those who recently bought for, say, £2.3m and now may be in negative equity if they didn't have sufficiently large deposits.
This won't affect the OP's mother, because she bought 50 years ago so is only losing out on money that was never earned and never existed anyway.