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.

We need to get over the idea that every homeowner is sat on a money making asset

Starting a thread about it is hardly getting over it

There is regional variance but the national stats are pretty clear.

Earnings aren't relevant to this debate. Home owners will have seen a decrease in their earnings power too. We all have!

If the value of an asset has only increased nominally and has dropped in real terms then this is the opposite of wealth accumulation, it is wealth loss. It isn't unearned wealth

@Itchthescratch I don't know how we'd ever arrive at a fair conclusion for factoring in inflation into tax though

By that reckoning, my income tax should be lower.

I think taxes become a bit of a runaway train but it would be easier to lower the rate of CGT and IHT.

Making housing an asset & ever increasing growth a key driver of the economy has fucked up the economy.

It’s a nice idea, but then how do we not also apply that income? Should we say that someone on £100k should only be taxed as if it were £85k because wages haven’t kept up with inflation? Should we only charge VAT on 50% of the food bill or electric bill because the costs have far exceeded inflation?

It gets too complicated and too contentious.

They won't have done though because they will most likely have been paying interest on a loan which bought the house and no doubt have spent significant amounts maintaining and improving the property.

Seriously? 😣 Is this what MN is coming to?

It's clearly a subject worthy of debate and discussion. This is the point of the forum.

You’re clearly right op. Facts can’t be disputed, and houses cost money to maintain. People pay a lot more than the purchase price due to the interest on mortgages, but still people who can’t get on the ladder are resentful.

They won't pay tax if it's not appreciated in value because there won't be a gain.

No, house prices had taken a plunge at that time as it was October and the Liz Truss’s mini budget. The peak was in the spring. And yes, comparable houses in that area are currently going for £600k this year.

Regardless, landlords still benefit from rental income, leverage from mortgages, paying down debt with inflated currency And tax-free gains on primary residences via principal private residence relief. Definitely not a cut and dried real term loss – not at all.

The £1m tax free is not correct. It’s £325k per person rising to £500k per person if you’re leaving your estate to your children or grandchildren. A spouse can benefit from the other spouse‘s limit.

Absolutely agree, that most of our governments have mismanaged the housing market goes without saying- there is an insane amount of house building going on , but it won't bring house prices down- which would be the only justification for it, there is plenty of housing unused and until that is all utilised house building is unconscionable. huge amounts of foreign investment keeps supply low and high immigration levels keep demand high- it's an insane situation.

Yes the national average shows that houses are worth 11% more than they were twenty years ago in real terms. There is greater wealth accumulation in some regions( South +20%) , and wealth loss in some regions (North -30%) in real terms.

I don’t think that using inflation (not sure which inflation index you are using) as a benchmark to calculate gain or loss is a good way to go about it.

You've misunderstood the term double taxation. This specifically relates to paying the same tax on a financial transaction in more than one jurisdiction eg you pay IHT in both the USA and UK.

The reality is all transactions are taxed multiple times in a life cycle. You pay income tax. With your net pay, you buy goods subject to vat. The company that sells you those goods will pay CT on the profit etc. This is not double or triple taxation.

This is wrong.

social housing is self funding. The model has been in place for many years. It’s actually a pretty good return which is why private companies have entered this market.

You've misunderstood the term double taxation. This specifically relates to paying the same tax on a financial transaction in more than one jurisdiction eg you pay IHT in both the USA and UK.

^This. From an expat who has just filed their French and UK taxes.

Yes but it’s not the full story, two thirds of people in social housing get housing benefit to pay for it. For those two thirds, nearly 3 million people, the government is paying fo4 it via taxes. That’s what funds it.

The income tax bands are supposed to move with inflation so that is factored into the system. The fact they haven't moved for the past few years is wrong IMO.

I think the idea that the government needs to even out consumer prices or incomes relative to inflation is clearly insane. I'm not suggesting that they do something like that for CGT either. The point is though that it's built on the premise that you tax gains. This only makes sense if the gains are real and not just nominal.

This is wrong. Social housing absolutely isn't entirely self funded. This is why you can't simply build more social housing which would be more possible if it truly was financially self sustaining. It relies on all kinds of discounted capital and other state funding/assistance to build it.

That’s not what fund the build. That’s what funds the repairs, maintenance and overheads, as it does for the large number of people who pay their private rents with universal credit housing element (used to be housing benefit)

My job involves modelling how social housing is paid for

You have a minor point @Itchthescratch but someone who gains £100,000 over 5 years from possessing a property that they bought for £400,000 and sold for £500,000 didn't actually do anything to earn that £100,000 compared with someone who earned £20,000 per year over the same 5 years by actually doing work, did they?

But yes possibly inflation could play a role - but as income, capital gains is under-taxed at only 18% for basic rate taxpayers and 24% for higher rare payers. I would support a policy change to say that capital gains tax should only be charged on the difference between the increase in value since purchase and the inflation level over the same period if combined with the tax rate charged being uplifted 40% for all.

No the data doesn't suggest that. https://www.savills.co.uk/research_articles/229130/382247-0

Then you should know that it is subsidised no? And you should know that it is not entirely self funded as you make out. And that the majority of people in them are having their rent paid by benefits which maintains it,

No, that makes no sense because then governments would be unable to levy any taxes in a recession. The reason taxes exist is to fund public services regardless of whether the tax base has gained or lost wealth in real terms.

Even people on benefits pay taxes.