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.

Hannah Fry did an interesting video about this.

She said that Stamp Duty and other fees are actually contributing to overcrowding, unsuitable living situations and house prices. Basically people with big houses want to downsize but by the time they add in all the costs they actually end up in a worse financial situation so they stay in the house that's too big for them. This then means that there aren't enough big houses to go around for people who want/need a big house.

I saw that video but it was about Stamp Duty in general. Not about the fairness of this particular policy

Replace the stamp duty by a yearly tax based on house size. Include all properties, owner occupier, rented out, social housing, etc.
Similarly to income tax, the % increases for larger properties.

People having already paid stamp duty on their property will only pay the new tax if they move.

Don’t change council tax though, we need to still be able to vote on our local authority based on their proposals on how to spend their budget (low CT/less services, pay more/more things available). The fact that high density areas often have a lower CT compensates for the fact that people living there have more pollution and noise and less space.

I don't think people's homes can be treated in the same way we treat other investments. Well that's an entirely different point - we don't tax people on their PPR here but lots of other countries do, we are just not used to it here.

there is a weird belief that homeowners in expensive areas are sat on loads of unearned equity in real terms i.e. profit.

Firstly, that is generally the case; here is how real house prices have changed over the last 20 years according to region;

London: +119% ~+25% to +30% (Massive real wealth gain)
South East / East: +87% ~+5% to +10% (Moderate real wealth gain)
North East: +39% ~ -15% to -20% (Lost value in real terms)

So it is precisely the people in expensive areas who have achieved lots of 'unearned' equity.

Secondly, it doesn't matter if their houses have gone up in real terms or not - they had to be more wealthy to buy it in the first place.

I’m wondering about this. I live in an affluent London area in an X council house which cost £1 million the house is too small for the five people living in it but obviously on a National level is expensive. We are surrounded by much more expensive homes. We are probably the cheapest house in our area. There are flats that are cheaper. According to the National office of statistics, the average property sold price in April was 794000 including flats. If everyone here paid .48% of there property price every year the local council would have loads of money for services. There are 85,000 properties in the area at the moment they collect on average 1900- 2000 per year per property, with this new tax it would be almost double 3800 per property on average. Surely this would only exasperate the differences in services between affluent and non affluent areas. Is the idea that this Money would go into a National pot not a local pot?

The calcs indicate 75% of people (owners of low value property) will pay less and 25% more (owners of high value properties). If you believe them.

Some people might think that this reflects the unfairness of system at the moment.

Housing inequality has been building in this country for 30 years with no government willing to do anything about it. So probably stands to reason that when someone actually tries to its going to piss a few people off.

I think fair play to Burham if he actually does this, but if he does then he will be the first person in 30 years to do something, so I'm not holding my breath. (Reeves made a crap attempt then fluffed it).

That does sound fairer than the current council tax system to me - if the intention is to replace council tax. If it’s in addition to council tax it may be unaffordable to a lot of people to stay in the houses they are already in.

South East: When adjusted for the Retail Price Index (RPI) and Consumer Prices Index (CPI), the net change over the past two decades sits close to 0.2%.

Yes SD is separate to a property tax. Yanbu hopefully AB will stick to growing other places rather than this policy.

No it wasnt... at the time I paid the same living in one room in the nurses accommodation whilst being paid a pittance, as those living in huge houses and earning large salaries down the road (Surrey).

It seems to mean those in the South will pay far more than those in the North even where Southerners have a smaller house and landowners will pay but renters won’t. Are those in the North and renters using roads, rubbish facilities, lighting, libraries, schools etc? Yes, so I don’t see how it’s fair. Way to go to cause division AB!
What about people who have retired, but own a house in the south. How will a 75 year old widow on a pension pay this tax? Will she have to move away from friends and family and go up north and rent? If we are going to incentivise renting like this, where will the rental properties come from? What will this do to rents (rents will rise presumably), will landlords recoup the tax from their renters (yes, so rents will rise further). Do we want rents to rise? I don’t think so…

London and the South East already contribute about 45% of all UK income tax so this would be madness from Burnham. Sounds like he is looking to get the nickname Burn Them.

The whole thing is crazy but it's a land tax so if they have a lot of land they might be taxed more. I'm in Edinburgh our prices are pretty high, council tax much higher here than in some areas down south. It's going to cost so much to sort it out.

I think it’s unfair. I own my expensive property outright due to inheritance that was taxed when it was earned, taxed when inherited and then we paid stamp duty so it was taxed when we bought the house. We’ve paid council tax ever since on the banding assigned.

And thank god we do own it outright because I am a student again and DH, the breadwinner, is now so sick he can’t work.

If we had to pay a property tax we would lose our home. Despite paying hundreds of thousands in tax on our own asset already.

If it means getting rid of stamp duty, then yes, but only then. Stamp duty prevents geographic and social movement.

You could get rid of stamp duty in lots of different ways that were fairer and made sure that everyone pays a reasonable amount for their local services

I think that no tax system is ever completely fair or without some 'holes'. I say that as a Scottish higher rate income tax payer who pays 62% on some of my income, which is more than people who earn more than me....(go look up the graphs to understand why this is).

Property - is increasingly a deciding factor in a persons wealth, and in future what the pass on via inheritance. The wealth of your parents is the deciding factor in wealth, not your earned income, in the UK foreseeable future. Houses are used by the above average wealth and earners a 'tax free' investment, often with a ratio of debt and cost that is lower than the low earners and cheap houses. I also think that the South East economics are driven in part by property costs, and a property tax that favours other areas of the UK is (long term) a Really Good Thing.

Local Income Tax or Local Sales Tax- I also think we should consider this as a partial solution. Local Sales tax founders as too many people use Amazon, so I err towards income based taxation.

Any model MUST be more progressive, like the Scottish model, with more bands and a clear burden on the wealthier in our society.

So on balance, I would look to a modest percentage of house value 'Council Tax' alongside a Local Income Tax model.

I would also all but scrap a Stamp Duty/LBTT and instead hit harder on Inheritance Taxes This would enable more people to move as they need to, while slowing the huge transfer of wealth via property.

Its an asset! It is an asset! Are you pretending you don’t know that its “paper” value is something you get when you sell it?

We should get rid of all other taxes and just tax unimproved land values. However there is no way that's what they'll do: it will just be an additional tax, like the US one, and is totally bogus. The govt seems to not understand how if they push taxes too far in one direction it will just lead to a backlash and decades of tory rule. I hate to say this, as a lifelong labour voter, but the current govt has no clue about economics or business. We are in for a swing to the right driven by the economy which will then lead to other right wing policies, that we just don't need to have foisted on us if only labour wasn't so mad keen on finding endless new taxes.

Yes, but you used the same services as they did.

I completely agree with you.

I’m sure some people have modelled this properly, but I don’t believe the salary to house price gap is proportional based on the area of the country you’re in, so as you say in one of your first posts, people in the south are generally already penalised financially by having to buy more expensive properties relative to their salaries.

(NB- before anyone starts, I’m aware the south in general is funded much better and has other advantages, but I’m talking purely here about personal income to living cost ratio)

Again no expert here but I always understood council tax was to fund local services, therefore to me, a tax that is proportional to the size of your house is generally more representative, albeit not a perfect system. But if you’re living in a 5 bed rather than a 2 bed, you’re more likely to have more people living there, and therefore be making more use of local services.

It isn’t a perfect system and I’m not sure what is but I don’t think this new proposal is in any way fairer.

I don't get that amount. I have to pay the mortgage company back first and then I get back what equity is left.

Im on the fence with this, my council tax is one of the highest in the country- we are also one of the most deprived areas in the country. My council tax at band c is more than Kensington. Band A (street terrace) in my area is still more than some affluent areas down south. I would actually be £900 a year better off with the new proposal and its unlikely my house price will ever rise significantly to make me worse off, but i do see for those down south they probably will be made worse off.

Note - the discounts available part..

Of course but that value is all relative and theoretical, because until you die you always need somewhere to live. So you can’t realise the higher value of the asset unless you sell up and move to a much cheaper part of the country.

it’s day to day terms which is what matters to most people - ie. How much money you have left at the end of the month, not some theoretical future value of your house if you sold it.