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/

The thing with the mansion tax though one could argue it can also help some people indirectly. Take that house in Richmond linked by @pouletvous. If it sold for 1.8million in 2014 it has not had much increase in 12 years. And the mansion tax on a 2 million property is small in greater scheme of things, can actually keep prices lower and from rising at that level. The real killer is the stamp duty for higher end properties and that was the Tories. It is a complete sunk cost and arguably what has depressed the London property market/stabilised it in the last 10 years. Personally, as a London my preference is for prices to remain relatively stable over a long period of time. The real problem we have in London now is the depreciation of the pound and the fact that it is now so much cheaper for foreign buyers with stronger currencies. I think a lot of the double council taxes etc are aimed at a deterrent there. London needs to be for Londoners primarily living and working here majority of the year, not second homes for the international rich. They can use hotels.

Exactly. Not that many companies would allow 80%, and if they do, they certainly expect the same 100% of the work delivered.

There are various aspects to this, which need to be considered.
Firstly, was the house bought outright or with a mortgage with interest payments?
Secondly, a property is only "worth" what someone is willing to pay for it. I am unsure as to how a value of 2 million has been calculated over a 60 year period, given the vast fluctuations in both inflation and interest rates during that time.
Thirdly, what about upkeep, renovation and modernisation costs during that time, all of which probably came from taxed income?
Fourthly, what motivation does this proposed tax give anyone to buy their own homes and thus relieve pressure on the stretched rental market - both public and private?
Fifthly, even if someone of 90 was prepared/able to sell up and move, where would they find accommodation that is suitable for their needs?
Surely most people buy a house that suits their needs at the time, possibly with a bit of contingency for the future.
It seems to be a very peculiarly British expectation that you see your dwelling as an investment.
Finally, if there is any doubt, I am not in favour of the state imposing arbitrary taxes on its citizens. The state's duty, in my view, is to provide the minimum to maintain a civilised society, but give its citizens as much freedom as possible to make their own choices and provide for themselves as they see fit.

what motivation does this proposed tax give anyone to buy their own homes

I’d say a profit of £1.985 million and no housing costs for several decades was quite strong motivation personally. Obviously the vast majority of houses aren’t worth over £2 million so there’s that as well.

Give over

My house wont be worth £2mil in my lifetime

Oh you should come to West London and hear what people are up to as a result of losing access to childcare.

The value of it it ~£15k a year now from the age of 9 months. You need to earn £35k over £100k to recoup that loss. A single nursery place is probably £28-30k.

The ‘short period’ with two kids might be 4-6 years of this, possibly even with two children in simultaneously. My ‘£0 income due to childcare’ covers income from £100-155k at the moment, a vast amount.

If the higher earner earns >£160k you will be using salary sacrifice to claim the childcare. If you aren’t, you should. You can basically accrue enough in your pension during the time your child is in nursery, to never really think about it again.

This group pay the most tax in Britain - 50% of it. And yet all of those with young children trying to drastically reduce their taxable income as a result of this policy. It’s absolute madness.

*edited because I accidentally clicked post
too soon.

It’s definitely not a red herring, the 100k has been in situ since 2010, in real terms it’s 159k today……

Of course he had costs.

When his heating breaks down he’s the one paying to have it fixed, just as one example.

This house most likely needed a lot of work and money for maintenance over the years. He can’t just call the council the have it done

All of this is paid out of income that’s taxed, and now he has to pay another round on tax.

Yes, PIL bought their first home 60 years ago - a three bed bed new build detached in a nice area - cost £3k. That helps to put the £15k in perspective.

I’m not sure about the mansion tax - I need to read a lot more about various options. But £15k sounds cheap now when it was actually not cheap 60 years ago.

I have no issues with a mansion tax, however: I do think the macro economics is important and understanding why house prices have inflated so much in places like London in the first place for such a tax to become necessary. Foreign wealth buying up swathes of real estate (Chinese and Russian billionaires), the advent of AirBnB moving property from home ownership to business venture etc. all play a significant part and no one has tackled that problem. In the meantime we look at the 'ordinary' individual for a solution. Stop external economies pulling the strings and heavily tax short term rentals and the market will cool down in the long term and rebalance somewhat.

Housing costs means rent or mortgage repayments. He has had decades with no housing costs.

I don’t need to come to West London to understand that statistically the number of people earning £100+ is relatively small and the subsection of those people with children under five is even smaller. If people wish to sabotage their careers and place themselves on the “mummy track” as I believe it’s known in law and finance that’s up to them. You’d hope that people with that kind of earning capacity would have the sense to take the long view.

we always try and fix the symptoms, rather than the actual causes. Foreign buyers and AirBnB have done incalculable damage all over the world.

No you very clearly are not understanding.

With one child in nursery you actually end up financially worse off if you earn under £135k vs earning £99k for childcare.

People won’t pay to work - so they put money in their pensions, and yes in many industries they are accommodating about temporarily dropping down to 4 days for a couple of years.

I know plenty of hospital doctors working 80% hours and refusing overtime to ensure they stay under the limit.

It doesn’t matter that ‘only’ 5% of people earn over £100k, the important part is that ‘small number’ pay 50% of all tax. That means any behaviour change among them has a significant impact on the tax raised by the government.

I don’t think you understand statistics @MidnightPatrol. A subsection of 5% is tiny, regardless of how much tax they pay. I’d really like to see the figures for the impact on the Treasury. I suspect it’s a rounding error. The top 5% pay 47% of income tax, not all tax, by the way, while the top 1% pay 28% of all income tax.

He had costs related to his housing.

This has to be deducted from the value of the property

How can you think it’s discardable on the basis of it affecting a small amount of people for a relatively short amount of time?

Such logic would mean we don’t need to worry about a lot of policies requiring funding.

i mean, unemployment benefit: should affect less than 5% of the population and should be working again within 6 months so let’s just not bother paying it…

The issue re. the proportionality is the complete disparity… by way of analogy, 1 person in a room of 10 pays more than the other 9 combined.

how does that not make you realise it’s wrong? Surely you can see how the 1 person will soon get passed off, particularly when they see many of the other 9 deliberately not trying to contribute more or making lifestyle choices to always need the 1 person to fund them. It takes the piss

That’sa renters view of housing costs who forget owners have housing costs beyond mortgage.

it’s one reason why they constantly feel aggrieved that their rent is higher than a mortgage, they forget other costs involved….

It’s a homeowner’s view of housing costs actually.

You are again focusing on the absolute number of people, not the tax raised on them.

They pay a lot of tax: incentives which drive them to reduce their income have a significant impact on the tax take. The impact of the £100k threshold are well known - the impact of the new childcare hours is less clear, as it’s so new, but the existing (far smaller) offer was already causing a huge number of people to cap their incomes at £100k. With the new hours, that incentive is greater than ever.

Whilst I have huge empathy for many retired home owners in this situation, the one cited in the telegraph is risible - both he and wife had money to invest (inheritance I am assuming) so likely had a 10k mortgage that he claims to have paid off over 30 years. So 25years ago, they were mortgage free, paying back a tiny mortgage by1980s and 90’s standards. They were not impacted by the property slump/negative equity saga that decimated some of my older friends in the 1990s because any secured debt they would have had for the extensions they mention and the ground floor ensuite for him would also have been minimal.

He is 91, the tax comes in in 2 years time. He’ll have the liability for a few years before (sorry to be callous) he likely dies anyway. He does NOT have to downsize or leave his home of 60+ years. Neither does his wife who may also be in her late 80s. The max of £25k that will accrue on his property while he and his wife finish their days is eminently recoupable from the estate when the property is sold. This is all tabloid level hysteria.

As a person likely to be hit by this eventually (main property is just under the threshold atm), I am completely relaxed about this. It is a peanut level tax compare to the others being proposed and discussed. We don’t really mind paying more taxes at all - but we have an issue with the mis-spending of the taxes we pay on: DEI; of newly arrived immigrants who have never paid into our system being prioritised for housing and school places over local, British and LT resident non British workers, of SEND provision being so poor that quality support and care is not universally available - only really to people like ourselves who have been able to buy that care - that we cannot afford to pay teachers, nurses, and other essential professional workers a wage that is on a par with other countries thereby protecting the quality of our health service and education for all users, adn the most vulnerable especially. I also have an issue with the fact that we will be required to run down our savings and sell our home - depriving our children of financial security and a solid safe start in life - to pay for old age care because we have financially planned, saved for our old age and for our children’s futures - when others either couldn’t or chose not to even try.

So in answer to the OP - I actually think it’s fine to pay the mansion tax, provided it goes into local services and not to central government. I also think it’s fine to pay a premium on council tax on second properties. I truly do. But I think the lack of recognition of ALL the other taxes when we rarely access the services they fund (schools the NHS, etc), and the additional VAT we also pay on other goods and services that stimulate the local economy, is a bit galling. We personally won’t be leaving the UK - we are proudly British [I was a child immigrant, btw, and am naturalised]; believe in civic responsibility and the importance of those who are able to afford it contributing to a fairer, kinder and safer society for our vulnerable members. But you cannot keep hammering people like us whilst not also trying to get people off benefits and into work, whilst not investing in education to support that, or having a policy on immigration that allows recent immigrants full access to the same socially funded entitlements as our citizens without ever having paid in… and then deride, denigrate and generally vilify us.

We bought what we wanted to buy with our own, earned and highly taxed money. Honestly MN baffles me at times. On benefits threads people shout loud and proud about how no one else can or should dictate how they spend their benefit, it’s up to them. Which I totally agree with. And yet, when you have earned it, and paid vast sums of tax on it, people like you want to question how i spend it?

I doubt very much that the impact on the tax take is “significant”, it probably amounts to a rounding error. The number of people is directly related to the tax take. That group of people is comprised of people who are childless, have children of school age and adult children, at least half of them are men. The subset with children under five might be 5%, 10% at a push. Lost tax revenue from incomes over £100k from 0.5% of taxpayers wouldn’t even register.

A flat should be paying less than a house, certainly. And generally they will be, given that they're usually much smaller.

Personally I'm in favour of replacing Council Tax with a Land Value Tax, which would really incentivise efficient use of land in prime locations.

Thank u !! This is what i was trying to get at!

The money is all theoretical- because that £1.985000 doesn’t currently sit in his bank.