Does anyone actually know what the property tax is rumoured to be?

[kirinm]

I’ve read a few bits and pieces and all I’ve gathered so far is they may get rid of stamp duty (a good thing for me personally) but then bring in other taxes which might include a general property tax and / or capital gains?

For buyers, surely the change is a positive one unless I’m missing something?

(Stamp duty on our current purchase is nearly £60k so if we somehow manage to avoid it, that would be brilliant).

What amazes me is that Labour don’t seem to be able to anticipate the consequences of their actions.

if you make selling more expensive, people won’t move unless they have to. We’re in our 50s, we won’t ‘downsize’ if it isn’t particularly advantageous. We live in an outer London property we bought at the right time. It’s the very common small 3 bed in an untrendy, ungentrified area but now worth just shy of £1m. We couldn’t afford it now. But it isn’t wealth until we don’t need somewhere to live. It’s a small house. We’d need to buy another property and the steps down aren’t as great as people think, even without increased taxes. I’m not leaving an area filled with people I love for a few extra thousand.

Similarly, promising not to increase income tax while increasing the burden on employers national insurance is non-sensical. It affects jobs and just encourages the illegal cash economy. And it’s not as if legitimate employers absorb that cost, it just increases prices and adds to the cost of living crisis. All totally foreseeable.

Surely a more sensible way to raise tax is to increase if for everyone via income tax rather than trying to manipulate individual parts as if the economy and country as a whole is not one vast interlocking machine. I think one of the think tanks has suggested this but Labour are tied to their promise not to increase income tax and are now tying themselves in knots.

Just reading a few articles and there does appear to be a lot of scepticism and doubt that anything will change as it’s so un-workable.

Surely a more sensible way to raise tax is to increase if for everyone via income tax

But not everyone pays income tax & how much more should people pay? Lower earners here do pay less than other European countries (higher earners are in line) but the problem with increasing at that end is the fact housing is so expensive.

Maybe it will be linked to the new ID cards and they'll join up the dots on ppl hiding assets off shore and buying supercars and 5th houses.
Here's hoping.

To reverse that then, Somebody living next door to you will be punished for the fact that they were just born 20 years later and they have to pay more for the exact same prioritisation.

Personally, I think they should just remove Property from the freemarket.
I would say the same about water And other utilities anything that a person needs a line should be drawn in the sand tomorrow they should say this is what it’s worth and that is what it is worth for the foreseeable future.
And we are taxed accordingly.

People who have done very well out of property don’t realise how destructive to the economy ridiculously high prices are and how bad the current tax regime is.

Money in property is ‘dead money’. It does nothing to help the economy and stifles people’s mobility. High prices also discourage people having children, something that we desperately need to happen. Stamp duty is another awful tax. It discourages mobility and is a tax on divorce, substantial for many, at a time when their finances are already being hit.

So, get rid of the exemption from CGT for primary residences, but allow indexation relief (so you are not taxed on inflation) and have an annual property tax to replace council tax, which can be very progressive, especially at the higher end.

You want to ‘crash’ the property market, although I wouldn’t use such an extreme word. But cheaper houses facilitate the next generation buying and having children, house moves are much easier, and people are incentivised to invest in productive parts of the economy such as equities.

You only need to look at Japan from the 90s onwards to see the destructive power of very high property prices to society.

Oh I agree it’s not perfect but there will be cost savings simply in its administration as the mechanism can be changed overnight. Some of the schemes are ridiculous. An annual tax not paid until the house is sold - in our case I hope at least one of us lives until our mid 80s so they’ll get some cash in 30 years maybe 40 - if of course it hasn’t all been used for care! The country needs money now.

When you say "done very well" out of it though, if you haven't moved in 20years you are in a home, not a property bought for profit. Its like landlords who have 1 home they love and look after being taxed the same as the huge companies who don't care to maintain them. Context is important.

@Newbutoldfather is right. It's so damaging to the economy and younger generations & I say that as someone who has benefited. Something has to change.

the thing with CGT on principal residence, i note your point about index linked relief - but what about improvements? we've spent about £150k on our house for a loft conversion, garage conversion & full landscaping front and back Plus new kitchen & 4 new bathrooms. But if we get taxed on that "profit" it doesn't seem fair.

There's no easy solution. Everyone is a loser.

@FirstCuppa ,

‘When you say "done very well" out of it though, if you haven't moved in 20years you are in a home, not a property bought for profit. It’s like landlords who have 1 home they love and look after being taxed the same as the huge companies who don't care to maintain them. Context is important.’

That’s a strange way of looking at it.

If you bought a property for, say, 500k and it is now worth £2million, you have £1.5 million of tax free profit.

The fact that you haven’t realised it yet doesn’t mean that you don’t have it. So you can downsize when you are older and take this profit to do as you will with, or leave it to your children, helping them buy a stupidly expensive property, and creating generational wealth.

Wealth and income and different things, ultimately one can be turned into the other.

Wealth and income aren’t different things *

I have ‘done very well’ out of property I guess but it means nothing to me as I live in my home. However I absolutely understand the destruction house prices have wreaked. I have teenage children. They simply will not be able to live within many many miles of where they grew up - if they are able to get on the ladder at all. If they want to save a deposit they will likely have to move back home for a considerable time when they should be living independently.

Excellent post. I completely agree. Incredibly high property prices have helped to cripple the economy and massively disadvantaged younger generations, with all the negative knock on consequences. Politicians only seem to be waking up to this now, decades too late.

I think you’ll find generally it’s the other way round and landlords do not have one extra Property that they love and care for. Typically they have one extra Property that’s not fit for human habitation.
The corporate have the pockets that are deep enough to maintain properties safely.

@padso,

I have also benefited, but that doesn’t alter the truth.

Of course you have benefitted, as have other older buyers. They have made a huge amount of unearned equity which can be monetised if they wish or borrowed against to fund whatever lifestyle they fancy. The lower house prices and shorter mortgages enabled older buyers to pay off their mortgages far quicker and then save up for old age/retire much earlier, etc.
Older buyers have also benefitted from a much higher quality of life compared to the middle aged and young. You have a lot of streets, particularly in London, where a couple in their 70s/80s bought on one or possibly two blue collar wages, living next door to a couple of 50 something professionals, both full time workers. Recently, the only young people in their 30s who can buy would need to be in corporate law or finance and/or have had a considerable amount of help from wealthy parents.

Agree with @DrySherry's post, which says similar to the above too.

No one knows what RR is going to do, although there is lots of speculation.
I think that a LVT on all properties (no arbitrary cut offs) imposed immediately (totally unrelated to sale) and a scrapping of stamp duty makes the most sense for the property market.
It would encourage people to move more if SDLT were scrapped and would encourage right sizing, especially at the top end, as people would be less likely to want to pay high property taxes unnecessarily.

@HRchatter sadly that is not the case. As I said, I saved and saved over many years, bought at close to the top of the market, lived for over a decade in really dingy conditions while saving to do some renovations and eventually did some renovations. But I haven’t actually made any money from price increases. There must be lots of people like me.

I am fully supportive of tax on capital gains on investments.

I have to agree with this. They should reward people who contribute, support those who genuinely need it and stop financing the unwilling and unmotivated.

Why would I want to remortgage though if I'm over 50? Not even sure I would be able to. I feel I bought at the peak and renovated at great cost using assets and savings up. I had/have no intention of moving and was hoping to pass on the house to my child but this is now impossible as a single parent. I have tried to claw my way up against the odds and am still being pushed down by the couples who flip properties on double wages and move every couple of years. They'll be able to pass on double to their kids while mine will be turfed out of the family home. I don't see how that is fair.

You mentioned a south east London borough. In somewhere like Lewisham you're looking at around a median price of £800k which will get you a nice semi. Perhaps it's somewhere like Southwark, which is nearer the £1 million mark for houses?

https://www.rightmove.co.uk/properties/164081081#/?channel=RES_BUY

Near where I live, there are many homes just like this that sell for for £180-250k

"They don’t all have (and we certainly won’t have) an extra £12k a year to pay a property tax."

There are two different things being proposed at the moment.

One of them is a replacement for council tax and there is no indication that, if this were to go ahead, then average bills would rise dramatically.

The second is a replacement for stamp duty. In this situation, after a certain date then stamp duty is replaced with an annual tax based on the value of the home in excess of £500k.

One proposal is 0.54% on values from £500k to £1 million and 0.81% on values above £1 million.

So, at the moment, if you buy a house for £450k then you will pay £12,500 upfront for stamp duty. Under the proposed plan there would be nothing to pay ever.

If you buy a house for £600k today then you will pay £20,000 upfront in stamp duty. Under the proposed plan you would then have to pay £540 per year.

In your situation, you mentioned that you are facing a stamp duty bill of almost £60k. This would indicate a purchase price of around £1.15 million.

Under the proposed plan, instead of paying almost £60k upfront you would have to pay £3,510 per year instead.

I was just disagreeing with the point about lack of benefits to those who bought decades ago (mainly the elderly) and pointing out that there have been multiple benefits and other possible benefits. If you are only 50ish, you obviously haven't benefitted as much as those in their 70s and 80s, especially if you think you bought at or near the peak. Timing matters with property purchases! I agree that speculators and the massive proliferation in lending to landlords had a negative effect on the housing market, pushing prices up for everyone. I don't agree that your child would be 'turfed out of their family home' though. Most people are in their 50s or 60s when they lose their parents and will have been living independently for decades. I don't understand this entitlement to their parents's home that some people seem to have.

It’s a bit weird that you’re finding houses for me and trying to identify where I live.

Just to add to my post above, I know a couple who were looking to buy a property in the £1.6 million region.

When they heard about this proposal they decided to hold off on buying.

If they buy a house at that price today then they will have to pay £105,750 upfront for stamp duty.

If this proposal comes into effect then they would have to pay £7,560 per year instead. Once you factor in inflation over the years and investing the £105k rather than spending it, it is quite a close call which would be better for them.