To think an annual property tax is incredibly unfair?

[Itchthescratch]

I come from an area with low house prices. It is great! My friends can generally afford houses even with lower salaries as the earnings:house prices ratio is better. Rents are also lower so they have proportionately more disposable income.

I have moved to a more expensive area where house prices are higher and people have really had to push themselves to buy a property. Salaries are higher but not high enough to make up the difference. They have had to pay more stamp duty , pay more interest and have less disposable income each month.

I am really struggling to understand why my friends in the South should also automatically be paying more property tax under the new proposals being suggested by Burnham supporters? What is the justification? They would love to buy a large detached house for £300k like my friends from home but this isn't possible. It feels like they are being double penalised.

Just to add house prices haven't risen in real terms in the area in live in now for 20 years so the value of my friend's houses is simply money they have paid in.

Best to wait and see what, if anything, is decided.

Yes, but in principle do you agree that it's unfair?

I agree. If we must have such a tax, it should be like for like, regardless of where you live - certainly for a 'standard' (non-mansion) sole home. An average 3-bed semi should be charged the same, wherever it's located.

I feel the same about stamp duty: somebody who buys a house in the South East is taxed far more heavily for the privilege of having to pay an enormous amount more every month for a mortgage; I could buy an identical house here in the Midlands and not only have a much lower mortgage to buy it, but also not be adjudged to be 'rich' based on how much debt I've been forced to take on and taxed accordingly on that debt.

The existing council tax scheme is hugely unfair. I can't say whether a replacement scheme would also be unfair as everything is speculation at the moment.

The annual property tax being suggested is that everyone pays 0.48% if their property value each year. Do you think that's fair?

Of course it might not be implemented but this thread is about whether the concept is fair in itself

I tell you what I think is unfair. I live in Edinburgh. There was a thread on here recently about someone who wanted to downsize to reduce her mortgage. When added in all moving costs they would come to about £15k. If I wanted to downsize to say a 3 bed bungalow in a less attractive area I’d be paying £700k and my stamp duty alone would be £43,350. So I don’t move. Ever. It’s obviously a financially daft thing to do.

Our current tax system is preventing me from moving just because I live in an expensive area. It’s such a stupid system. It traps the elderly in their expensive, unsuitable housing, and stops people moving to change jobs. It’s flagged as the single most damaging tax for the UK economy.

The proposed tax would remove stamp duty, and get the same amount of tax out of everyone living in a street, not loads out of those who just moved there and not a lot out of others. It’s so much fairer than the current system.

And expensive areas generally mean higher income. £100k salary is fairly common in London. It’s no big deal though because it’s soon eaten up by the costs of living in a city. So Londoners paying higher council tax? Just add that to the higher house prices, commute, childcare etc and take it off the higher incomes.

The answer lies in the detail around how the value is calculated. Is it at the last sale, the last mortgage valuation, will there be a whole department of valeurs being paid to value properties every x number of years. And how is the value calculated, based on mortgage expectations, sale expectation, other arbitrary number.

I don’t automatically think replacing council tax is unfair, but I’d love to see the detail before deciding how I feel.

I think a wealth tax is entirely fair. You are taxed in your wealth, if you have more wealth you pay more tax. But I also thought that the poll tax was fairer than council tax.

Ok well I have less wealth than my Northern friends because I have a huge mortgage and less equity than them in my house. My house is worth more though on paper. Why am I being taxed more for having a big mortgage and less wealth?

It all depends on the % that they use. With the figure of 0.48% that you quote, I would actually be paying around £600 less.

London has one of the worst earnings:house prices ratios. It's literally double the North East so no, Londoners aren't being paid enough to absorb this new tax on top of cripplingly expensive house prices.

Yes, but surely how it impacts you personally doesn't totally dictate your idea about what is fair?

Someone in my hometown with a family of four living in a detached home in a lovely area will be paying £1.5k a year. In my local area the equivalent would be closer to £6k. They wouldn't use more services or anything that would justify them paying more. They would have a higher mortgage, pay more interest etc already.

It could be a lot fairer than council tax, depending on the detail.

It would halve my council tax - as much as I'd love it, it would bankrupt my council as I'm in an area where I'm actually in one of the more expensive houses , and in Band F for council tax.

What exactly makes it fairer though?

Does anyone know whether there would be anything equivalent to the single person't discount for council tax? If not then is going to be particularly hideous for single parents living in expensive parts of the country. If you have only one income and need house large enough for you and kids then you are going to have ludicrous mortgage plus ludicrous property tax.

That’s then complicated by equity. Somebody who owns a home worth £500K outright or with only a small amount of mortgage to pay off is wealthier than somebody with a property of the same value with a 90% mortgage and only a small amount of equity (or potentially, negative equity) - but I can’t imagine any property tax policy is going to take this into account.

Well we would be £85 a month better off under the new scheme. The current council tax system isn't fair, we're band D my neighbour is band C, our houses are the same size but we are an end terrace and have a side gate which means our garden is 3 feet wider than theirs. So for that extra 3 feet we have been placed in a higher band!

I'm not sure the new scheme would work either, who will do the assessments every year, how much will that cost?

Well at the moment there are people living in £350k houses who are paying more CT than someone living in a £1m+ house. A new scheme based on % of worth may be fairer. Depending on the detail.

Fairness is a totally nebulous concept.

What is ‘fair’ about paying CGT if you make money investing in a company but not if you make money on your PPR? What’s ‘fair’ about council tax or SDLT for example?

We tend to accept taxes we are used to and object to new taxes - it’s got little to do with fairness.

So the prices in London go down.

Its supply and demand - people want to live there so its expensive. My South East home would go down a bit

Also - depends on the calculation of house value, last sold? How will they do that, we are still paying council tax from a house valuation from years ago I think

I was late teens when poll-tax was brought in, and I did initially object. But actually, it was the best solution imo. Discounted for disabilties and incomes as appropriate.
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But I explained upthread that I'm from one of the areas where this is the case and it's generally a good thing that house prices are lower. They still use the same local services so why shouldn't they pay their way and they benefit massively from having smaller mortgages and better earning:house value ratios? Ultimately my friends at home have a relatively expensive and nice house in their local area so it makes sense they contribute the same as someone down south with a comparative house relative to their local community.

As someone who lives in an expensive area, moving to a house like mine would cost over £200k in stamp duty alone- this is for a nice house but far from a mansion. I'd quite happily swap that for a 0.48% value tax, which works out at about £12k (which is only about £7k more than I pay in council tax).

People don’t pay taxes according to how much of a service they use. We have this idea that council tax is linked to services but it’s not, it’s just a tax. I pay a lot of income tax, it’s not because I ‘use’ more government services, it’s because I earn more.