'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?

No need. She can delay payment with the intention of paying upon death. Labour will be gone shortly and the next party no doubt will abolish it, so nothing to worry about.

Exactly! Two million would get you a gorgeous house outside of London fur a quarter of that plus you could set plenty aside for taxis/train fares to see friends family once a week.

Sorry but your mum could - as others have said - equity release, refuse to pay until the government claims it from her estate after she dies or take in a lodger (?)

What you really are concerned about is how much this could effect your inheritance which is fair enough

I mean yes there may be some price bartering around the £2m threshold as a result of this, but that already happens at the stamp duty thresholds.

Likely. It’s a sop to people who think it will raise much.

I think this post was written in a way to illicit sympathy but it doesn’t stand up.

I posted earlier about hopefully the charge could be deferred but actually that’s not necessary as other posters have pointed out equity release is an option. She doesn’t have to move at all or even think about it. She would just leave less behind.

Yes it’s not the most appealing option for her beneficiaries, but if you claim it’s not her fault that she has amassed so much equity, you can’t also claim that her beneficiaries have any right to that cash!

Err yes I realise that and its precisely my point. no treatment could take place until there was an xray. if the person in that position was unable to request the xray then there should have been someone on the unit that could. but apparently they are all off on a Friday. so a pretty pointless drive all the way to my local hospital (I am rural) only to drive all the way back again and now wait for an xray appointment and have to drive there, have it done, drive back, wait for the follow up, drive there have the follow up.... so 6 journeys instead of 2 and you cant see that that is wasteful of resources?

Borrow against the house

Yes that's exactly what the rich dynamic north east needs. A load of pensioners living off the equity of their old houses they sold in the south using up all the carehome places and hospital places, replacing all the young people that have had to move south for decent jobs. (This has actually happened so perhaps we cant blame Labour...).

I'm not going to be concerned about people that live in houses worth £2 million, sorry.

Some people actually have real problems. Yes it would be disappointing and upsetting to have to move, but thank God they have the option to do that when other people in financial hardship don't.

I agree OP. The principle is wrong. These houses were likely not worth anything like £2m when brought. The fact they've appreciated to that is not these peoples' fault or within their control.

They are already taxed on their income. To charge them a continuous additional tax for the privilege of literally just continuing to live in the house they already own is just batshit.

Some of these people are high earners, yes. But they are already taxed a huge amount on their income if that's the case - the top ten per cent of earners already contribute 60 per cent of all UK tax revenue. People on incomes of £70-150k are already paying way, way over their fair share. Fewer than half of people in the UK are even net contributors of tax - we're becoming a welfare state with a small economy attached. If you keep taxing these same earners for every single thing they do, the economy will shrink further, grow will be further supressed.

Furthermore - it'll only generate £400m! So in the scheme of things sorry, but it's a drop in the ocean. It will make zero difference to schools, the NHS or our trillions in national debt. There are a thousand other things she could have done to find £400m.

However - my prediction would be that it's so complex to administer and so fraught with problems and potential legal challenges that it'll end up being scrapped. I just can't see how it's workable.

@rafeal Indeed and as other have pointed out, even in most of London a £2M house will be a pretty large and expensive one to run so it is likely an elderly, very low income person would have had to have considered something like equity release for maintenance or even the day to day costs of insurance, energy, council tax etc..

But it's not even necessarily a house There are1 Bed flats at1.95 million in London

My elderly mum got a cheque for £1 million tax free through the front door while she watched Countdown.

Next day another £1 million cheque arrived for DF.

That’s what they got for living in London at the right time.

Mansion tax is nothing in comparison.

It’s all gone on care fees now, and DP didn’t help family, who are also gone from London. Which is sad.

The people living in these houses worth over 2 million may well be going into residential care sometime within the next decade and may need that equity to pay upwards of 85k a year just for a basic care home ( or more if it’s London prices)
The house will probably have to be sold at some stage , with higher council taxes imposed with the mansion tax who will be able to buy them ?

@Thechaseison71 So? You still have a property worth £1.95M whether it is a massive house or a flat. TNH flats at that level tend to be luxury new build or conversion in central London or Canary Wharf with a high level of services - which i doubt is the sort of property the OPs mum is living in.

My 2 bed flat in London is worth the same as a four bed house in some parts of the UK, am I less well off because it is a flat?

Will it though?

What it will do is make 2 million plus properties less desirable. I would have thought people who don't want to pay the mansion tax would look for cheaper housing to fall below that and then the demand pressure is going to fall on the houses below that level and actually drive those prices up.

Less people buying a house for £2 million means more people in the market for houses worth (say) £1.5, causing demand might then drive them to £1.75.

So top end prices may well fall and mid range go up.

This is where a wealth tax would be fairer to everyone rather than a tax based on the house that you own. Common sense I think, but hey, what do I know?!😂

Whether you agree or disagree with the mansion tax, it seems to me that there's a fundamental problem with the concept. It's based on property values, but these are directly impacted by the mansion tax itself. People will be less inclined to buy properties subject to additional taxes and who knows how that will affect the price that buyers are willing to pay? Who's to say what a house is actually worth until it changes hands? It's not as if there's currently a stable, healthy market for this sort of property that could be used as a reference.

They are saying they are looking ways to defer it. So they take it when you die or sell I guess.

£400m and if that. And yep to last part. They just needed something like this in the budget.

Property will continue to increase in value.

It will be interesting to see what happens to property values. Maybe anything worth £2 million or more will remain static but those worth below may rise a bit but only as far as the £2 million mark.
When they are valued presumably it includes the condition of the house - I mean, a leaking roof and damp and so on will reduce the value of a property. Will every single house which is borderline £2 million have to be inspected by a surveyor?

Are all those cheaper areas prepared for the mass exodus of Southern grannies moving there, buying up all the housing (pricing out the locals) and needing that area's health and social care (especially if they are moving away from their families)?

So a stealth IHT increase then.

IHT being the Uk's most unpopular tax....

I mean there a lot of sub £2m houses in the South that these grannies could buy. Contrary to what many believe on Mumsnet many many of us live in London and the SE in places worth under £1m and even (shock horror) under £500k.