AIBU to think a £2m homeowner should pay mansion tax?

[LadyJos]

Anyone read the Telegraph Article about the 93 year-old man paying mansion tax on his £2m Richmond Home he bought for £15,000? AIBU but isn't £15,000 to £2m a fairly good return over 60 years, and shouldn't he pay some tax at the end? I can't help thinking since the home is mortgage-free, he has options here to pay the £2500 a year...
‘I’m a 91-year-old veteran about to be dragged into mansion tax. This is wrong’
www.telegraph.co.uk/money/property/house-prices/91-year-old-about-dragged-into-mansion-tax/

I don’t recall saying it would be unfair for me to pay more tax.

I think I have said that I already pay more than I did a few years ago, and I’m not interested in getting upset about it.

People who have more pay more, that’s the way it should be. I wouldn’t be comfortable taking more from those who already have less so either me, or anyone who had similar or more, could just have more money.

That’s just basic humanity.

So as I said, you have more, so why don’t you pay more? You can if you choose? Make an extra contribution, it’s very easy. The truth is, you don’t want to, you pay the tax that you are expected to, like most of us, and exactly like the man in question did. But you do want more to be paid by people who have more……than you. Just not you, because you pay what you are asked? Like he did? That isn’t humanity, it’s illogical. If you think people who have more should pay more and YOU have more? YOU pay more, surely?

Houses aren't bough on inflation, or wages, they are bough on "can I afford the monthly mortgage" The ratio of household income to mortgage payments has remained the same for decades ( though lots of the individual components of that ratio have changed). The house is question ( and all others) is as affordable or not, now as it was then

TBF say its worth £2.5m, HMRC will
probably make £600k in tax from it when its sold.

I think the Richmond constituency actually pays the hugest amount of inheritance tax of any area in the UK.

Thats a lot of years of £2-3k mansion tax!

This simply isn’t true. We couldn’t have afforded to buy our house now on the current equivalent of the salaries we were on when we bought it in 1999. The same goes for most people who have owned their houses for that length of time. The value of the house has inflated way in excess of salaries.

I do pay what I’m expected to. Generally, people pay the tax they’re told is owed.

Nobody’s telling me I owe £2.5k more - I don’t own a property that would fall into that category.

In the event that I do end up in a £2m house, I’ll pay what I’m expected to, because if it’s owed - it’s owed.

If someone decides that they’re moving the tax thresholds, I don’t see a way or even reason to just refuse. They’ll take it off my wage like they always do, and I’ll get over it.

I don’t not pay invoices because I don’t like them, or decide to not pay my bills because I’ve had enough of them.

The same applies. The government tells us what is owed, we pay it, it’s spent. Life goes on.

Living in London, some of these “mansions” are rather unimpressive and would count as a lower middle class home elsewhere in the country… and no, we can’t all just sell up and move to cheaper parts…

The top 10% of earners in the uk pay 58% of income tax…

or:

90% of people pay only 42% of the total tax take.

let that sink in.

how can that be fair

You didn't read what I wrote

Zero understand of economics and behavioural incentives here.

It’s very well known that the tax level influences behaviour - and that this is often negative for tax generation. Look at Scotland and their 48% rate, they collected less tax as a result - that example from this year.

Where I live the £100l personal allowance / childcare thing is the big drama of the moment. Half the people I know work part time as a result - no good for raising tax revenues.

Expensive properties are the same - stamp duty is so high, transaction volume is very low. No one moves. Adding the mansion tax… doesn’t remove the stamp duty issue. Prices will no doubt drop - but, what impact overall will it have?

Id aspire to a house like this but tbh between stamp duty, mansion tax, the risk of LVT, house prices and interest rates…. I just am not sure I can be bothered. The outlay is too large compared to the benefit. That’s not good for HMRC if lots of people are doing it.

I did.

And income tax is just part of the tax take @ExpectMore. Proportionally people on low incomes pay more of those incomes on taxes like VAT, insurance tax, council tax, and the myriad of other regressive taxes that fall outside income tax.

Well, What's actually happened is the value of houses has risen in proportion to the amount available to borrow. As banks raise the amount you can borrow based on the average salary, the value of land/houses goes up to match it. That's not surprising when you consider that houses are a limited commodity lots of people want and are in competition with each for. The end result of this though is that for each generation the percentage of their homes the bank owns at any specific age goes up. So someone who bought in the 60s would have either had much less of his salary as a percentage going to pay the mortgage OR he would have paid of the mortgage a lot sooner. Plus, having to borrow much larger amounts to buy homes costs a lot more money overall because you are spending longer paying it of and paying a lot more interest to the banks to do so. The people that benefit from this the most are banks and people with the money to invest in land/homes as a speculation not shelter.

None of that is the man's fault. But it has created a situation where land and houses are a major source of wealth and investment. And he has benefitted that as he now "has" 2 million in a house that cost much less. He didn't invest so as to sell at a profit or rent at a profit or benefit from taking loans against the house. However, lots of people do benefit for those reasons and I don't think it hurts for them to pay a tiny amount back to keep the whole society ball rolling on (as others did for them). People that don't intend to sell, and really can't afford it, aren't hurt by the tax. Because they can defer all payments until they sell. Something that keeps getting missed.

I can’t bring myself to feel worry for people who will choose not to live in a £2m house because it’s inconvenient financially.

I understand behavioural incentives. I think they’re wrong.

Actively avoiding paying less into the system isn’t to be applauded.

I sat on the threshold, briefly - I increased my income so I could earn more and therefore have more to keep. I like money, I like having it, and I like spending it.

I wouldn’t choose to lower my income or aspirations just to tell the government off.

In case what I wrote was too long...
Someone spending a third of their income paying back a mortgage that is fully paid of in 10 years, and someone spending a third of their income paying back a mortgage that takes 35 years to pay of are both spending the same "ratio of household income" on their mortgage. But that doesn't tell the whole story about their financial circumstances. It also.doesnt account for the rise in deposits required and time taken to save those.

Also theyre using the money to fund social care....

I’m not asking you to worry about people
living in £2m houses, I’m asking what happens to the tax the government are able to claim if it creates incentives for people to avoid paying that tax because they think it’s too high.

People aren’t lowering their incomes or aspirations to ‘tell the government off’, the reduction in tax raised is just a side effect t - they do it because they are maximising their time / money eg people putting huge amounts into pensions to avoid the additional rate or to avoid them losing free hours.

The government doesn’t end up better off as a result - they end up worse off, because their tax policy is changing people’s behaviour.

But you have it the wrong way round. House prices go up because people choos to pay over 35 years not 10. House prices go up because people have two incomes not one. House prices go up because lower interest rates mean people can borrow more. House prices go up because of wage inflation. If you give everyone more money, nobody is richer. Our man in his £15K house didn't choose or ask for any of this, it's all caused by buyers choosing to drive inflation, but people seem to think he should pay more tax because of it.

I think you are right to a point about perverse incentives. Economists are very aware of the effect of taxes on behaviour. When there was a window tax people boarded up windows restricting daylight etc. Sometimes this effect is used deliberately- taxing alcohol or smoking ro discourage unhealthy behaviours for example.

The problem is, income tax is one of the main ways governments raise revenue and they need to raise revenue. It's also one of the worst taxes in terms of influencing behaviour. Lots of people have argued that actually taxing land is better. It doesn't discourage people from working. In fact, any behaviour changes incurred could be a good thing since it makes land/houses less attractive as speculative investments. We want people working or investing in stocks/shares. Not making money through land.

The mansion tax would be classed as a (very moderate) form of land tax. So the arguments about the negative impacts of other taxes (eg income) on the economy don't really mesh. In fact some economists, thought that income tax should be completely replaced by land tax. I wouldn't go that far. But I also don't think mansion taxes etc are a negative to the economy.

Most £2m houses are either bigger properties or bigger gardens, either way very expensive & time consuming to maintain and you are not using any more public services than a cheaper house. So what exactly are you paying tax for, plus you are already paying £153k in stamp duty tax to buy a £2mill home. House repairs, insurance etc are super expensive so really unreasonable to expect the owner to have spare cash for extra council tax. I really don't think homes should be taxed, there are so many other items that are excessive luxuries, definitely more so than a home, and you can't always assume people have benefited from house price appreciation as that is no longer a given.

Bollocks is it envy. I’m prepared to pay a mansion tax and am in the firing line. An old man in London shouldn’t be let off the hook because he’s old. Add a charge to his estate and make it payable on death, what’s the big deal?

Why are you so angry? Have you got to pay it too? Or are you another temporarily embarrassed millionaire, voting against policy that won’t ever affect you?

It's not really choice... Noone thinks "I don't want to pay 1,000 pounds a month mortgage over 10 years I want to pay 1,000 pound a month mortgage over 35 years instead".
What happens is:

1. The amount available to borrow increases (for the sake of a argument let's say its from 2 times your salary to 3 times)
2. Two people on the same salary competing for the same house are bidding against each other. They know the maximum they can borrow so bid that
3. The house that did cost 2 times the average salary now costs 3 times

That's simplified but imagine that happening on a national scale for several decades. (Incidentally for women the big change wasn't when women started working, it was when womens income could be counted towards the amount banks could lend. You see a jump in house prices then but continue to see a rise over the decades as the multiplication of the household income banks would lend out increased.)

The man in the article didn't create that situation. He has indirectly benefitted from it though. Some people have benefitted a lot more including the owners of major papers like the Telegraph (until recently major landowner Lord Rothermere). Hence the outraged articles.

Incorrect. I think you mean more of their income by %, but not more of the tax by %.

Important to get the specifics correct…..

The £2m mansion tax, really isn’t what many people think it is. If you can afford to buy/pay a mortgage on a home of that cost - and the associated running costs etc - then the higher property value tax is really not a big deal. It’s about £105pcm top up. The second property council tax is much higher (3-4x that amount), by the way, and is due regardless of how much your second property cost or is valued.

It only affects a small number of properties: it is thought that only 165,000 properties in the Uk are worth over £2m, and the bulk of those (114-140,000 properties per google/Savills) are in the £2-2.5m bracket. @70% of all of the 165,000 £2m++ properties are located in the greater London area.

If you have a house that has appreciated to that level and are now retired and thus cannot afford find the extra because you are living on a pension, it accrues and is settled upon death. So even if you live for 20 years without paying it, that is simply an additional £50k to pay in tax at the end out of the estate.

What people should really be aware of is that they won’t maintain the threshold at £2m - because there are actually not that many properties that will generate the charge, as we’ve seen above. So it will get lowered - to 1.75, then 1.5, etc until anyone with a home over £750k could attract the charge - after all, that buys a luxury home in many parts of the country outside London/SE which is not accessible to even professional couples on joint incomes of £100k (think teachers, nurses, etc) unless they have benefited from some sort of inheritance or family assistance… and the whole raison d’etre of Labour’s tax policy is to make those who seem to be ‘doing too well’ [compared to the average man on benefits the street] pay.

So I fully expect all of those crowing right now about that tax, because it’s only the very wealthy paying it, will end up eating crow when they too have to pay it. Because they will.

Eh, but that is not how it works in the UK! Proper wealthy people are not paying more. 🤣🤣🤣🤣

Like tax the rich….and now a 50k annual salary makes you rich 🤣.

its been the current level since 2019, the equivalent today is 66K……. Had tax bands moved with inflation higher rate would be 66k