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.

There is plenty about the present CT that is flawed. Done by drive by assessments in 1991. Who knows what the inside of the house was like ?
Extensions added on does not prompt a reassessment of the CT . Only when and if the present owners move out.
Reassess CT when an extension is built. Link it to planning applications.
Property taxes won’t take into consideration the insides of the house. The value will still be based on the external.
It might encourage people in the South of the country to undermine their property values when houses go up for sale.
I would super tax foreign ownership of property. And super tax anyone owning hundreds of modest homes to rent out.

Agreed. Poll tax? Not fair - somebody in a mansion pays the same as somebody in a bedsit. Council tax then? Not fair - somebody in a cheap property still pays a much higher percentage of their income/wealth than the person in the mansion. Land value tax then? Not fair - somebody in London pays more than somebody in Teeside for the same type of house. Just forget it and increase income tax then? Not fair - why penalise people who have to work vs those with loads of assets.

There are lots of US states/districts with something a bit like a land value tax and they're used to it and it seems to work just fine. No it's not universally popular but what tax is?

One thing I don't understand is how this tax would work with his devolution messaging which seems to be about empowering areas to raise and spend their own money. Surely this goes absolutely against this and would be the south east hugely subsidising other areas. It would create a huge dependency and disincentivise local councils from managing their costs as they know the money is coming from elsewhere

It's inherently unfair because:

Person 1:
£1m in savings, owns £500k house outright

Person 2:
£490k mortgage, resides in £500k house.

In accounting terms, one has assets of £1.5m, the other £10k.

Similarly taxing interest received is wrong since it takes no account of interest paid.

I have mortgage of £30k at 3%, and savings of the same amount at 2.5%. But I pay tax on that 2.5% interest. If I pay mortgage off I pay no tax.
But now I have no immediate safety net.
So perverse tax encourages me to organise my finances in a more risky way.

It's stupid

But you are banking on the value having gone up. You are leveraging money now to gamble that you will wholly own it later. If it were not financially advantageous to you then you would not have entered into the mortgage. Why pretend?

We have had this years in Ireland and it still boils my blood. For instance I will be paying my mortgage off till I am of retirement age however because the value of properties in the area have gone up I am paying the percentage based on the current value. It is an asset as in when I die it will be an asset to my kids but I cant afford to sell up as then I have to still buy elsewhere and would have to pay stamp duty at a ridiculous price. It is not a wealth tax here as most of us are working our holes off to pay our mortgages, all it is is another tax because you decided to get into debt and buy rather than rent. The only reason there was no outrage is because those of us who have to pay it were working and couldnt protest.

Also as far as I know does not get charged to people in council housing and we get nothing in return for it just an extra tax for the craic.

Well that's clearly not true, not everyone who lives in London earn £100k. We bought our house in a lovely area of London about 30years ago and at that time it was not so lovely and house prices were 10x cheaper. Me and my husband do not earn anywhere near £100k and our salaries haven't really risen as we both work for the public sector.
So yes the are lots of Londoners that own houses that are worth more than £500k but paid a lot less for them when they bought them and their income is less than £50k.
So why should we be penalised just for living in an expensive part of the country. It should be fair across the board for everyone and based on the type of property you live in e.g flat, house, mansion. Or the amount of land that property takes up.

I think her point is the asset is mainly owned by the bank (because of the mortgage) not her.

If you buy a one bedroom flat for £500k in London (zone 2/3) with a deposit of £50k, you have a £50k value in the asset not a £500k value and a monthly mortgage of about £2.5k. But you’ll apparently be taxed as though you own the whole £500k flat. How does this enable people to buy/scale up as their families grow (it doesn’t)? How is this fair (it’s not)?

But here the idea is to replace stamp duty so you could downsize if you wanted to pay less tax

What are you talking about? I am ineligible for social housing so if I want secure housing for my family then I need to buy.

If I wanted to make money I wouldn't take out a mortgage with interest to pay each month on a property that is unlikely to increase in value in real terms.

If the new tax is supposed to replace both council tax and stamp duty land tax, will the government take some of it to replace the £11-15 billion the stamp duty land tax currently brings in? If so, then people will be paying more each year than they currently do in council tax. If not, what is the government going to tax to replace that income?

That’s nice, sell your house and move so that the government can take another bite (you already paid tax when you earned and paid off the mortgage).

So in effect they are trying to really get people to downsize.

Yes, you are right. But if this is the price to pay for the abolition of Stamp Duty, then so be it.

There are 2 misconceptions evident from the discussions here:

1. That equity in a house can be liquidated easily to pay an additional tax. While this IS possible, it is very expensive and runs the risk of you losing your home. Pensioners tend to be asset rich and cash poor, so would find it difficult to raise extra cash from income any other way if they don't want to sell their home.
2. That council tax gets spent locally. It doesn't. It all goes to the government who dish it out according to perceived 'need'. In the SE, councils don't get to keep most (or in some cases, any) of this tax. If AB plans to change this so it stays locally along with local control of it, he has my support. But I will be very surprised if he does, because 'Northern' councils will get less; unless they increase their local rates significantly.

I agree. My parents live in an area where I grew up. All the houses are huge 4 or 5 bed detached. Thry all had families in yhem when I grew up there. Guess who lives in them now.. the same people but now they are elderly couples or elderly single people, as its so expensive to move and downsize and they lose so much money. All of my mums friends children who are now parents with kids, live in smaller houses with smaller gardens to play in, in cheaper areas. Me included. It is absolutely ridiculous. Elderly or older people with kids that have flown the nest are rambling around in huge houses as if they move they will lose so much money it makes it a bad financial decision.

I think the government do an awful lot of damage by bandying about ideas to gauge public sentiment. What do they think all this talk of a land tax is doing to the already suffering housing market?
As for me, I will be interested to see what they do for those of us who have recently paid stamp duty. I have, a huge amount, but I’m sure that won’t matter. My “broad shoulders” will be expected to keep carrying an ever increasing load. Oh and be happy about it too!

What happens here is that if you are a pensioner you can defer the payment basically till you die and the house is sold OR the people who inherit pay the backlog of the payment so person dies, years of local property tax taken first then anyone who benefits from inheritance pays inheritances taxes plus whomever buys it pays stamp duty and all other taxes involved with purchasing a house.

So choose to move elsewhere, rent instead of buy and save instead...

Oh wait, we would not save and rent as it does not make as much money long term and is more expensive still...so the system, although expensive, favours those who can get onto the property ladder and even more so if you choose to move up that ladder...

Yes it is a practical necessity, but it is also a good long term wealth improver compared to other options.

I agree about the councll tax. I live alone in a Band A two up two down in a rough area. I get the 25% discount and i pay more than if I shared a Band D house. Only a couple of quid more a month but it does illustrate how unfair council tax is. I know very little about the proposed land tax (has it even been proposed?) but I do think that council tax which managed to be the strange offspring of domestic rates and the poll tax in that it combined property value with an acknowledgement of a discount for lone home dwellers needs to change .

I do wonder how it would work in places like some parts of Cornwall, where people might have bought a house on a low to average salary, stayed in the house years and now the value has rocketed.

It's not suggested that the property tax replaces Council Tax.

It would be in addition to Council tax and go into central government coffers, not local council funding.

How does this give the government money to spend now?

He should just stick to the devolution stuff. In theory demand on London properties goes down and other areas get growth and associated house price rises.

Some interesting discussion about property taxes on this podcast
Moving Home with Charlie |
https://www.podbean.com/ea/dir-gi8wx-2f1405a5

I live in the south. House is worth £550000. I'd be quids in at 0.48% of value instead of council tax? My council tax is a breathtaking £4k a year. We moved about 120 miles from one 4 bed to another exactly the same size, smaller garden. We went from a D to an F.