Latest mansion tax should be on top % homes locally not nationallu

[Lionfisher]

Rachel Reeves is front running yet another class warfare policy in the press, this time suggesting everyone who lives in a home over £2m should have to pay 1% on anything above 2m.

First - I’m fine with this. I live in SW London and would probably have to pay some.

But I’m ONLY fine with it if everyone round the country does too. Meaning that it should be on the top 5% of homes by REGION (I’ll leave it to other people to argue what region means, all the data is there to do it).

We could happily sell our 4 bed home and move somewhere else in the country and buy a 10 bed castle. Or just buy another 4 bed home and stash the rest in the markets. TBH we might even do that if this comes in.

But people don’t want us to do this because it prices them out of local homes etc. Which is pretty much what this policy would do, price people out of local homes so they move elsewhere and prices up somewhere else instead.

But more than anything you can be far more rich on far less money in other parts of the country. So this isn’t a tax on property it’s a tax on the south.

As long as top X% of homeowners elsewhere are paying their 1% above their threshold I’ve no issues with this.

But people won’t agree with me as it’s easier to think it should always be “other people” who pay…. or will they?

So the gain as defined by the CGT rules will be what she may go for.

I wonder how often? On sale or transfer? Or every 5 years? 10 years? On your primary residence (which will I think be the target)?

yes this is a good point but would be very complicated unless it’s at sale.

I can't get my head around why people think rich Londonders should pay more Council Tax to subsidise the North. The whole point of Council Tax is that it's a local tax to pay for services in your own area. You can think the rich in your area should contribute more than the poor for local services but to expect someone from outside the area to contribute towards them is bonkers.

If you took the money out, moved somewhere cheaper, and put the rest in shares, you would be turning an unproductive asset into a productive one. The fact that it will force land rich cash poor folks to move to something smaller is also not, I would suspect, an unintended consequence...though removing stamp duty on those moves would be fair, too I would say.

Generally speaking stamp duty on homes is a poor tax mechanism, as it prevents people from moving when it would benefit them to do so, and puts an inflationary spiral on house prices (because people want to sell for what they paid, including the stamp duty).

Don’t know why my post has been blocked - it contained a link to Dan Neidle’s blog about why CGT on main residence is a very bad idea. It will completely crash the housing market as no one would want to move house.

There are far better tax changes to be bare around property - abolish Stamp Duty and revamp Council Tax for a start.

Trying a different link to the same blog.

https://www.linkedin.com/posts/danneidle_reports-suggest-labour-may-introduce-capital-activity-7364208499863486466-1d4O?utm_source=share&utm_medium=member_ios&rcm=ACoAAA1Cn0QBQUrpGgFz0usvTS3-xih_CrUcxRw

Doesn't make sense to me OP.

If you pay a rate based on house value over some local threshold, then if you had for example a £2.5m house in london with a threshold of £2m and the same value house up north with a threshold of £500k then the northerner would pay 4× more tax for the same value house.

I’m not fine with it at all! We already pay a high council tax and are taxed in the highest bracket - this is totally unfair. We have done a lot of work to our house to increase its value and make a home that works for us - why should we have to pay another tax for that?
They are destroying the economy and now the housing market 😩
Still paying the mortgage this will be a step too far.
My graduate child is struggling to find a permanent job too - just a labour induced bloody mess as predicted!

Remember we are dealing with a left wing government here. Socialists believe that all wealth belongs to the state really. They just chose how much you are allowed to keep.

So don't assume any fairness will apply. Or any thought as to the effectiveness of the policy or how much it will raise. Labour hasn't applied logic to any of their changes so far. They don't care if the tax is unfair or targeting any particular group. They just hate people they consider rich which is the middle classes. So I definitely think they will be gunning for our houses now. Why wouldn't they? Perfectly logical to them looking at what destruction they have already wreaked.

We should all be living smaller and less prosperous lives and no one should be able to buy any advantage over anyone else. And that incudes a house over £500,000. And if you try and better yourself Labour will slap you down in the name of "fairness and equality".

You’re making it too complicated. It doesn’t need to be index linked at all. It just needs to be set at the right level. Likewise improvements add to the value of the home (and this compounds over time) but again just set it at the right level.

You already pay CGT on second homes. It’s not that straightforward to claim capex deductions. New roof, new kitchen, new bathroom … improvement or wear and tear? Wear and tear, not eligible. 2 storey extension… adds to value of home by more than you paid for it (usually). Again taxing the diffs at a lower rate would get around all this.

i can’t disagree

Trust rules allow for taxation every ten years. It may not be quite that complex for a house.

Bringing in CGT would be tricky.

I’d assume, because that’s how CGT works, that you’d still get a deduction for capital improvements to your house (if you didn’t, people would be dissuaded from improving homes they might sell soon, which isn’t what we want - a bunch of shoddy first time homes no one wants to spend money on), but people who’ve owned their house a while may not have the records/receipts for this, because they never thought they’d need to show the cost of eg the extension they did in the 90s which makes up a decent chunk of the rise in value. Would the answer to that be “that’s unlucky, you’re paying tax on the whole gain” or would they introduce the tax with a specific starting point eg “the gain from when you bought the house or from 2015, whichever is later” because then people might be more likely to have the relevant records.

You’ve totally validated my point. You’re comparing fundamentally different homes! A northerner in your case is not paying 4 times the tax relative to someone in the south because property doesn’t work that way.

They’re paying a rate relative to being worth 5 times the local threshold. In London it’s only 25% above the threshold as opposed to 400%!! The equivalent house in London would be £10m… so they’d pay MUCH more tax on the difference!!!

The difference between capital expenditure and replacement/maintenance is indeed very murky and this is why I believe it's too difficult to expect this to be evidenced potentially decades after the work has been carried out. For example, a new roof can indeed be a CAPEX item if performance is significantly improved. If you were getting a new roof fitted ten years ago have you documented the performance improvement this would bring to prove it was CAPEX?

It would absolutely only be fair to index link so called profits from housing. If you bought a house for £100k it should now be worth £191k if the price simply tracked inflation. The £91k isn't profit in real terms and shouldn't be treated as such.

I mentioned this earlier. Just don’t make the rate as high as it is for second homes (28%).

the more leeway you give people the more they argue.

But you would have equity that a northerner doesn't. That's what RR will be sniffing around for. No matter what destruction it causes.

The tax won't be sensible or fair. We know this.

Honestly, she needs to put 2% on the basic rate and stop pretending you can make bricks without straw.

completely agree

People keep talking about houses that have massively increased in value. But what about people who have only bought recently and seen no increase but will still be subject to the mansion tax?

Shouldn't have bought such a valuable house knowing Labour are about to come in and shaft everyone.

Or people that bought 4 years ago and will already be in negative equity having paid an awful lot of stamp duty up front? They also will be looking at much higher mortgage rates. No-one seems to care about them.

I would much rather a property tax then paying another whack of stamp duty.

This.

My house was very expensive for my region when we bought it 5 years ago. It’s still only valued at what we paid for it. We used cash from a windfall to buy it. Our household income is less than £40K. We’re already paying 10% of our income in Council Tax.

There has been no ‘unearned wealth’.

I don't think you quite grasp the situation this country is in.

Keep your big house and your five cars and your holidays. Make sure those Northerners don't get any of it, or any of those other groups you resent. Keep it all. Sit on it. Build a big fence around it all and put a man with a gun to guard it.

You will have to, because if we don't fix inequality this country will turn into Mexico, or South Africa, or Brazil. That's what happens to countries with no meaningful middle class. We all need to grow up a bit. We are in serious trouble.