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.

Well i did say if cash buyers.

CGT is just 24% for a higher rate tax payer, 18% for std rate, minus allowances and capital expenses.

Anyone with significant wealth can avoid IHT, trusts, company structures, gifting over time.

But the main thing you re forgetting is the person on whose estate IHT is being levied is dead, they no longer care, they aren't paying anything.... the shroud have no pockets.

Lets say my very wealthy married Aunt left me £2m, £1m tax free, £1m @40% IHT... i pay or rather dont receive, £400k but i bank £1.6m, not a bad days work.

Whats the "it " that you are referring to here? And what are these "real terms" of which you speak - how are you calculating them?

I think that if housing was no more extending real terms, it wouldn't be so hard/impossible for many people to afford to buy.

Also, just because somethings regional doesnt mean it's not real.

@jasflowers your wealthy married aunt example is flawed because you don't carve out £1m before IHT kicks in, only £325k. The £1m exemption is created where a married couple pass their shared joint estate to direct heirs (children or grandchildren) in which case the IHT exemption is doubled and includes an additional £175k per deceased, assuming the matrimonial home is part of the estate.

Your tax-free maximum inheritance before IHT is £325k.

I am sure you won't be unhappy to know that 40% of the £2m you are inheriting will be taxed 40%. It's still a large amount as you'd receive £1,005,000 (60% of the taxable £1.675m) + the £325k.

Edit for SPaG

@Itchthescratch say that there was a period of 5 years during which the housing market is really sluggish and house price increases only just exactly matched inflation, rather than exceeding it.

Say person A and person B each have £400,000 to invest in year 1. Person A puts their £400,000 in a 5-year term cash investment product which guarantees an interest rate which will always match inflation (yeah I know there are inflation-beating options but this is to keep the maths simple) and Person B buys a £400,000 property in year 1 which they then sell after 5 years.

In the meantime, inflation is steady at 2.5% per year for 5 years.

Again for maths simplicity we'll say both A and B are higher rate taxpayers but not in the Addtional Rate band, and they've both maxed out their ISAs separately so that we don't need to fossick with ISA rules.

Person A's £400,000 investment earns £52,563 in compound interest across 5 years. The first £500 each year of savings interest is tax-free so they pay income tax at 40% on the rest so will pay a total of £20,025 in additional income tax on their investment income

Person B's £400,000 investment in a property also earns £52,563 in the difference between bought price and sold price, despite it being the same value in "real terms" as you put it. Under current rules the CGT they pay on that £52,563 is only 25% so they pay £13,140 in tax despite having had the same benefit from their investment compared to the cash investor.

If anything, CGT should be more, not less, but under the system you are proposing person B should pay zero tax on this part of their income because their investment "only" kept pace with inflation. Should the same be true for person A too?

Well i never, i didn't know that.

But the point still stands, in my case, i still receive over £1m for doing precisely nothing at all.
Plus i don't pay any NI or higher rate tax at 45%

Of course, in the vast majority of cases, most people leave their estates to their children.

Considering we don't have property taxes upon sale (of the main home) i think its quite generous.

As you say @jasflowers , you are fortunate, and even if you don't inherit everything, a million quid is still more than most people.

But if the house forms part of your aunt's estate and you sell it, there may be CGT due too, if you already own your own home, as it would be a second home. Don't quote me or rely on this: I am not a professional!

CGT only payable if there was an increase in value of the inherited house, which is possible given Will disputes and probate delays.

BTW to avoid any confusion, i didn't inherit £1m, i don't even have a wealthy Aunt!!

My DD may well have to "pay" (from the estate) IHT (pension IHT changes) but as i've explained to her, the residual amount is still very significant.

75% of housing is owned by over 50’s. 55% by over 65s. They built up equity in the boom growth years so , there’s a lot of unearned wealth sitting in housing.

Not quite.

https://www.gov.uk/government/statistics/chapters-for-english-housing-survey-2024-to-2025-headline-findings-on-demographics-and-household-resilience/chapter-1-profile-of-households-and-dwellings

I am always massively impressed and a bit intimidated by your command of facts, citations and statistics @BIossomtoes .

@BIossomtoesI can’t see how that contradicts what I shared? It shows that 80% of over 65s own their home but I can’t see anything about what % that constitutes of total housing stock. The numbers I quoted were from a savills study but the fact that over 60s have around £6 trillion in assets is widely known so the idea around half of that is property seems likely.

Research was part of my job in the past. Google makes it a piece of piss!