Housing isn't a source of unearned wealth

[Itchthescratch]

If you bought in the last 20 years.

Houses are now worth the same as they were worth 20 years ago in real terms. We need to get over the idea that every homeowner is sat on a money making asset and therefore is in a preferential position to pay loads of tax on all this non existent unearned wealth. Too many people don't understand how inflation works. £1 in 2006 is worth £1.65 today. House prices need to go up 65% just to be worth the same in real terms.

It’s fairer to tax unearned capital gains than income. Wealth accumulation is currently treated more favourably than income from work. Capital gains should be taxed at the same rate as income tax. Wealth accumulation urgently need to restructure so that work isn’t treated less favourably than wealth accumulation.

It is for most people who brought in 80’s through to 2008. For a lot of these people wages outstripped inflation and so the real value of the mortgage debt inflated away. The deposit for my property of £60k in 2022 was the same price of the entire property my parents brought in 1994.

I agree

I bought for £450k in 2018 and sold for £550k in 2022. No updates to the house.

But if in real terms you are actually losing wealth then why should you be taxed on nominal gains?

Your argument only works if people are making gains that beat inflation .

Only approximately 6% of estates pay IHT: the allowances and reliefs are generous.

My house has risen £55k in 20 years. Minus interest on mortgage plus maintenance I’ll have no profit. Partner has risen £470 k in value in the same period, different areas of the country

Yes, but we need nuance in any system to recognise that some gains are above inflation and some are below it. If it's below it then it's a real terms loss.

It depends on the area, parts of London had seen above inflation growth in the last 20 years.

2022 was the absolute peak of the market in many places. You would undoubtedly have made a real terms gain during these years but if you had held on until now then you could well be into loss making territory. House prices have dipped in may areas but even if they've remained static where you are, inflation means that £450k in 2018 is now worth £600k now.

Say your house sold for £550k today, do you think it would be fair to tax you on your 'profit' even though we know it's actually a loss? CGT would cost you at least £20k on a headline £100k profit.

@Itchthescratch "CGT for landlords is an issue though. Why should they pay tax on selling something that hasn't actually appreciated in value?"

but they only pay tax on the gain, don't they? So if the property hasn't increased in value, then there would be nothing to pay? That's what I thought anyway.

I would cut public spending before I raised any other taxes.

impossible with an ageing population

But if in real terms you are actually losing wealth then why should you be taxed on nominal gains

Why do you think income tax bands havent been uplifted in line with inflation?

Yes but my point is that inflation means that a gain isn't really a gain.

Using the post upthread as an example. If I bought a house for £450k in 2018 then I would need to sell it for £600k to break due to inflation and the purchasing power decrease that I would encounter in 2026. If I sold at say £500k and made a real terms loss then HMRC would be looking to tax that £50k as profit when it obviously isn't profit at all.

Depends where you are. A lovely Victorian flat bought for £40,000 in the late eighties in my town is for sale for around £280,000 now, forty years later.

The "double taxation" argument against IHT is mad - all sort of stuff is double taxed. I am "double taxed" every time I buy any good or service that is subject to VAT. I was "double taxed" when I paid stamp duty. What is so special about the estates of deceased people that they should not be "double taxed".

Why is the state pension triple locked against inflation?

There are lots of different approaches to inflation in our system.

Isn't that true for most people?

Using the post upthread as an example. If I bought a house for £450k in 2018 then I would need to sell it for £600k to break due to inflation and the purchasing power decrease that I would encounter in 2026. If I sold at say £500k and made a real terms loss then HMRC would be looking to tax that £50k as profit when it obviously isn't profit at all

Investments are not guaranteed. If you want to allow for inflation how would that work if gains beat inflation? Pay more?

Why is the state pension triple locked against inflation?

That was a mistake, triple lock should be paused. But that won’t go down well.

Because all your examples involve some kind of sales and consumption taxes. We are all subject to these. That is ethically and practically different than a tax that works to restrict who you can give your money to in life and death.

True, housing is not a source of wealth- it's a store of wealth, which means it will still be seen as a legitamate target for taxation in the future.
Britain has always been obssessed with property owning- the idea the government wants to tap into that is no real surprise.

Houses are now worth the same as they were worth 20 years ago in real terms.

This may or may not be true. In many places the value of a house has increased faster than inflation. The UK average is 74%, which exceeds the 65% of inflation. The SE and southern part of England has increased by an average of 86%.

Also, you must consider that average income has increased slower than inflation. So a person who earned £1 twenty years ago now earns 85p.

Too, any increase in the value of an asset is a type of unearned wealth. The only wealth that is earned are payments for services rendered or goods sold.

I think 1m max IHT free is fine, my parents house is over that

There is far too much money tied up in housing & incomes have had a batting. Governments don’t really have any other option.