Replacement of Stamp Duty with Land Value Tax

[AnalyticalChick]

I was reading in Money Week that all the political parties see an ongoing annual Land Value Tax as the preferable alternative to Stamp Duty.. The change is likely go ahead within the next few years. Would MNers prefer to pay Stamp Duty on an initial property purchase, or an annual LVT on the value of their property?

It does depend on the rate but if you're in a property worth 750k (which could be a fairly average sized house in London) then even 1% is £7.5k out of taxed income. People don't have that sort of money sitting around.

I can't see how it could be a viable proposition unless it impacts on new purchases only. And in that case the market will stagnate overnight.

@user187656748 It is NOT the house that is being taxed, it is the land the house is built on.

which in london can be a big part of the value of the property.

Most people in London live in flats, so the land value will be divided amongst many others who own a block.

You need to stop thinking of LVT as a version of purchase stamp duty.
It is collected every year so will be at a comparably lower rate
It is collected from EVERY property every year
even the ones owned by dodgy offshore companies
It is collected from farm land which currently pays no land tax

The nearest equivalent is business rates (which it will replace)
and they are at about 0.2% of value

So you think the government would be prepared just to sacrifice all those who don't live in flats? Even Corbyn is going to struggle with that one.

I live in a big house in a cheap area of the country on a number of acres of land (heavily wooded and the entire area under a TPO so it can never be built on). My house is large and is the reason the property was fairly expensive since the land itself is not inherently valuable.

In comparison a two up two down in london could easily go for a similar price. Not because its an amazing building, but because the land is valuable. The rebuild cost of the house for insurance purposes would be much lower than the rebuild cost of my property.

@user187656748 People who live in flats will probably pay less, and people who take up lots of land all of their own with a house in a big garden will pay more.

user
So in London the percentage applied to each plot of land would be lower ....
In Wales it would be higher.....
Why is that so hard to understand ?

Band D council tax varies massively across the country
so do Business rates
so will Land Taxes

@user187656748 If you live in a cheap area, your land will be of low value, and will be lightly taxed.

@user187656748 If that land you own is only worth £200k. And the tax is 1%. That would be a LVT of £2000/year.

Well if we are talking 0.2% talk then that's hardly a money spinner for the revenue. I'd be delighted if that replaced my council tax. On a back of fag packet calculation it would be a quarter of my council tax bill.

I don't find it hard to understand differentiated taxes at all. It would seem strange though to have a lower rate applied to London where all the zillionaires live. Kind of defeats the object somewhat.

I am not disputing that this has been a mooted topic. I am simply saying that AC has an agenda as her fortnightly threads show. She regularly tries to talk down the market in one way or another and has admitted that she is hoping for a property market crash.

@user187656748
She regularly tries to talk down the market
And your alternative is to talk up the market so you pay a higher LVT. Very clever thinking there. Give yourself a higher tax bill

I'm not trying to talk up the market. I am not intending to move. The value of my house is only really relevant to me at the point at which I move. I also have a high income (heavily taxed) and so I could afford a rise anyway if it came. We wouldn't be one of the families being repossessed.

But tbh the way in which you delight in constantly trying to talk down the market which could have a devastating effect on many thousands of families, is quite sickening. This would be an interesting discussion since there are some very knowledgable people on MN (ta1k being one of them) but for the fact that the reason you like to debate these things is to try to undermine confidence so that you personally can gain.

@user187656748 You'll be ok then, since you can easily afford a high LVT. But I'm sure many others will not appreciate you trying to get them landed with higher LVT bills, by trying to keep all those land values over-inflated.

An annual property tax is standard in many European countries.

The value of land in this country is entirely dependant on what is or can be built on it... in other words planning permission, which is given by the council, who will also collect said lvt... so if the council need more money they can relax planning regulations to make a few plots of land valuable to them.... e.g. an acre of land in the south east with no planning is worth 50k... that acre with planning for 10 1 million pound houses is worth 5 million pounds... the council have just increased their take on that land 100 fold with the swish of a pen
Corruption would be more rife in councils than it already is.
Revaluing council tax thresholds from a-g with a scale from a-z would make far more sense.

@Alexalee True if a LVT replaced council tax. However, it is likely a LVT would go to central government, as stamp duty does today. The Money Week article definitely spoke about a LVT to replace stamp duty, not council tax.
PS An acre of agricultural land is worth about £10k.

Actually, just looked at it again. It said a LVT to replace both CT and SD.

I don't like the idea of a land value tax. Increasing property values will mean homeowners pay more tax each year because their houses are increasing in value. I don't think houses would have become a target for more taxes if house prices had not gone wild. People should just be happy to enjoy living in their houses, they do not need to earn investment income from rising values, too! Whenever people start making lots of money, the government always wants its share to fund services.

@pippapoppins "I don't like the idea of a land value tax. "

Why not?

If the government wants a total tax take of, say, a billion pounds a year, why is it better to take it from VAT? Or Income Tax? Or Council Tax?

What is it about one of the methods that you think is in some way worse than the other methods?

@PigletJohn I just think it would be better if houses were not seen as a pension that earned people more money than their jobs do. It is only the vast unearned increases in value that the government has noticed as a big source of income. With a LVT, all the government needs to do to increase its tax take is to stoke up a housing boom so it can magically collect more more tax revenue.

Unless the "land" in this ridiculous proposal is rented out, it doesn't generate any fucking cash with which to pay the tax! So where is the money supposed to come from? Your already-taxed income? Brilliant!

If houses are making their owners tons of unearned money, that money should be taxed. Since it is only earned through government policy, maybe capital gains tax on houses would be the best way to do it. And maybe even a 100% inheritance tax for houses.

I hate the idea. It will affect loads of people who live on lower incomes even though they own a property.

At least stamp duty is a one off payment to buy a house and you budget for it in the costs of buying.

If they need to maximise income then they need to look at the levels of stamp duty payable on very expensive houses and also to look at the council tax bands, to ensure that a multi millionaire in one area isn't paying the same as a 2 bed flat dweller in another area.

An ongoing cost to ownership is dreadful. Fine if it's a tiny amount and they abolished council tax but I doubt they would.

Look at what happens to liens and the American government with relatively low amounts of unpaid property tax, they take the property. Such a bad idea.

Now if you own and if you have worked to be mortgage free that's it, a land tax would change all that.

Personally I've worked towards becoming mortgage free and moved 100 miles away from friends and family so that my living costs are low, as my income is low.

Where am I and someone like me meant to find additional ongoing money from. I.e those in difficult situations in which to earn extra money. So me and people like me would be affected, retired, carers, disabled etc.

I would also be pissed off at having paid stamp duty recently.