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.

People have affordability criteria.

Have you ever rented? If you have then you would understand why people buy. I have rented a lot in my life and it was absolutely the right thing to do at the time and wasn't money down the drain. It can feel like money down the drain when rent is more expensive than a mortgage would be and you aren't actually paying off your house but it's definitely horses for courses. For me though, owning would have been more expensive as I was moving around a lot and didn't want to commit to one area.

The point is though that unless you have a SH lifetime tenancy then you can basically lose your home at anytime. People tend to want security and stability as they age, especially if you are trying to raise a family. People want to own the roof over their heads. Most people don't view their house as an asset. Do you actually speak to your friends and family about this? Very few people view their homes as some investment opportunity.

I think you’ll find most people do view their house as an asset. Particularly people who have paid off their mortgages - that’s the majority, by the way. 55% of residential properties in private ownership are mortgage free.

They don't view it as an asset in the way investors typically view investment assets. It is fundamentally for most people a home first and is arguably more of a consumption good than an asset. Surveys consistently show that the majority of people buy their homes for reasons other than wealth building or investment. You insisting otherwise is just inconsistent with the available data.

The extent a house is an asset is also the extent to which it isn't a liability. Mortgages, maintenance costs etc are all ongoing liabilities. Even if you have paid your mortgage off, this doesn't mean owning your home is a fantastic asset. It's illiquid and currently offering a terrible return on all the equity invested in it. You could sell up, rent and put all your money in the bank and make 5% per annum doing nothing. Oh and you also wouldn't be subject to this stupid property tax.

It is a nonsense to treat homes like other investment assets. The government traditionally recognised this and it's why we don't pay CGT on the sale of our own homes.

A house owned outright is an asset. It’s irrelevant whether or not the motivation for its purchase is investment. It can be sold for money and is treated as an asset for inheritance tax purposes.

Would you still have single person discount?

Not if you're living in it. It might become an asset at some point in the future if it needs to be sold, but people need a place to live. You could argue that a car is an asset, but if you need it to get to work or care for a sick relative then you can't just sell it.

Because you can't capitalise on the wealth of the home until you sell it. People prefer owning a home because you are typically ending up mortgage free which makes retirement easier to plan for. It provides you more financial freedom to make choices like poor health drop your hour's or if you had to stop working you don't have huge pressure to keep that roof over your head.

Well yes because at that point the person is dead and doesn't need a home. 🙄

No

"Because you can't capitalise on the wealth of the home until you sell it."

Yes you can. You can part sell assets just as you can part own them.

When your home increases in value, you gain home equity.

A house is indeed an asset and assets held ought to be taxed more.

OP’s issue is that the government’s proposed tax does not count the liabilities held against that asset (I.e. a mortgage) and this does particularly affect the young.

OPs other issue is that had they known of this tax earlier they may have made different decisions.

The first issue isn’t going to be addressed. It would be too complicated and too easily gamed. The second issue is just a fact of life when it comes to tax policy. See also vat on private schools. Its why it’s good not to change tax policy too often. It’s worth it for the government if the resulting policies are far fairer for the tax payer in the long term.

It doesn’t matter if mn posters get excited by the thought of taxing 1%, there’s posters who want higher taxes at the rate Labour do, or higher even. It is what McFadden meant about every Labour meeting.

Even Burnham will know the backlash of that, if he doesn’t then it’ll become fairly evident quickly.

If you put VAT on private schools why not on university tuition fees as well.

It isn't fairer for the taxpayer in the long term though for the reasons you outlined in the post and:

• redistribution of local funds nationally to fund local services run by local councils would be a case of taxation without representation. Those paying the tax have absolutely no say in how the money is spent as they don't get to vote in these areas elections. This is fundamentally undemocratic.
• To tax primary residences as if they are an investment represents a significant change of approach and absolutely should be put to the people. The 2024 manifesto promised not to tax working people, yet we know that working people will be disproportionately impacted by this. The Labour government does not have a democratic mandate to start making such major changes only two years since they were elected. This sets a terrifying precedent that anyone who cares about democracy should be against.
• the policy basically exempts private renters and SH renters from paying for the local services they use and in the case of SH tenants are more likely to use more expensive local services. We know that there are over 100,000 households in the UK that enjoy subsidised SH and will now be completely exempt from paying for local services whilst the rest of us pay their share. This isn't fair!
• this isn't a wealth tax if it isn't looking at actual wealth or even income. It's looking narrowly at one asset, ignoring the fact that many people are highly leveraged and pretending that this is a shortcut to determining wealth. It's bonkers. Property isn't even the biggest source of private wealth for people. Why is the state turning a blind eye to investments and more importantly pensions?.
• Areas with lower house prices benefit from this when it comes to affordability and the subsequent quality of life. The earnings to house value ratio is better in lots of areas and this leads to more disposable income and more people being able to get on to the housing ladder. Why doesn't the government see those who live in high priced areas are often already stretched trying to fund housing and don't then want to be hit again with a property tax when they already have paid huge amounts of stamp duty and huge mortgage payments.

Wealth taxes pay no heed to income. They’re not about income. They’re about the opposite of income - they’re about assets. So say you have investments and a £2m house that you live in. You live off the investment gains - £20k a year - which are subject to income tax. Would it not be fair - if we’re looking for things to tax that the house is taxed too? If we purely had income taxes it wouldn’t.

I find it odd that out of all that you picked up on the fact that I mentioned income. A wealth tax doesn't look at income but HMRC define 'wealthy people's through either income (earning over £200k a year) or assets (worth over £2 million). The madness of a wealth tax targeting people that have nowhere near the income or assets that the HMRC uses to define wealthy people is madness.

Every single definition of wealth tax talks about net assets. Even your example glosses over this when it is so fundamental to calculating wealth. So if the person living in the £2 million has a mortgage for £1.8 million then why should they get taxed on their house more than someone that owns a semi in the North outright that's worth £300k?

There already is a mansion tax for £2m plus properties.

So when are Londoner retires to Dorset and requires adult social care, why should Dorset Council tax payers, pay for an incomer?

Londoners get massive central government subsidies for very expensive public transport like the Underground. Roads in Dorset cost far less.

Council tax covers an arbitrary set of services and exclude others that city dwellers rely on.

I don't live in London, I actually live a few hours away from it. I come to London to work a few days a week and use the public transport then. I would say around a quarter of my friends or their partners so the same. We aren't even in a typical commuter town. Lots more people rely on London transport from outside London than people that rely on Dorset rural roads outside of Dorset.

Is this the “initial cap”? How long does it last? Sounds like a strategy to string out and spread out any rebellion, before the “initial cap” is lifted.

Apparently, it couldn’t be bought in for years, so best not worry.

Under your approved model £20k less the income tax would not even pay for the 1% property tax on a £2 million house (in London likely to be something like a 4 bed in Zone 2 maybe with a smallish garden) which would be £20k on post tax income. The money earnt in London supports the rest of the country. Do we want to disincentivise this by making London too expensive to live in? Will that improve the country’s finances do you think?

You still haven't answered why your only home should be taxed every year based on a theoretical value, when taxes on dividends, savings and capital gains are generally paid only when you actually receive income or realise a gain. "Would it not be fair" to be consistent?