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).

Yes of course they do unless they don't want to bother to reduce their CGT liability.

I just don't think you can make the assumption about everyone particularly as it's only the last few decades we went digital. So my question remains what happens now!?

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 a home you purchase 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 instead.

Well yes they have because the increase has been due to inflation - thats my point

My parents bought a small 1960s house in 1970 for £6000. If you apply inflationary rises to that it would now cost £118,610 to buy. Those houses sell for about £125,000 if they are nicely maintained. That means the actual capital gain is probably zero since most home owners will have had to spend far more than £6,500 on a property in 55 years.

Your question makes no sense. What do you mean that we have only recently gone digital? The world existed before that you know.

If someone owns a property which is not their principal dwelling then they have to pay income tax on the income from it and CGT when they sell. As such they keep very detailed records. Whether those records are digital or paper is irrelevant. the point is HMRC need to see evidence

The second would result in a massive drop in money in for HMRC since they'd be taking a small payment every year rather than a large up front payment.

The only way they would make money in the short term is if they make those who have already paid stamp duty also pay the annual property tax.

What part of my question doesn't make sense?

The world existed before that you know.

Why are you so rude?

Of course the world existed before then but you surely appreciate there are issues with non digital records? More susceptible to damage or getting lost.

Not everyone who has additional properties think they will sell them & feel the need for detailed record keeping. Some people are just bad at it too.

Are you saying without any receipts HMRC disregard everything? That was my question.

Where has the figure of £60k come from OP?
Stamp on £800k is £30k... or £70k on a second home.

I absolutely share your concerns - were in the middle of a sale and I can see us shelling out for stamp duty and then being asked for the new tax on top.

I'm not rude but you don't seem to understand either inflation or CGT yet you make strong statements on policy which is dependent on an understanding of both.

My very point is that people don't have records and they will have been lost.

Yes at the moment if you do not keep records then you cannot deduct these costs from your "gain".

My parents bought a small 1960s house in 1970 for £6000. If you apply inflationary rises to that it would now cost £118,610 to buy. Those houses sell for about £125,000 if they are nicely maintained

You are aware the world is bigger than you though. If we are sharing anecdotes then my parent's house cost 40k in the mid 80s and would sell for 1.6m now. Same for my in-laws. This is true for swathes of London.

Even in the rest of the country £125k is not the normal price for a house.

For goodness sake this isn't about "me". I'm simply using these as examples.

I'm simply saying that a lot of the perceived rise in property value is actually just inflation.

Yes at the moment if you do not keep records then you cannot deduct these costs from your "gain".

Thank you finally asking my question. I'm not sure why that means I don't understand CGT.

Of course I understand inflation! I've experienced wage stagnation & fiscal drag 😆😆

I'm simply saying that a lot of the perceived rise in property value is actually just inflation.

I'm simply saying a lot isn't...

The vast majority of people who bought in the 70s will have seen more than just inflationary gains.

My point was that there are various fundamental problems with applying CGT to principal dwellings. One is inflation - this would need to be stripped out. The other is inability to evidence improvements over very long periods of time.

No nobody knows yet, probably including Rachel

😂😂😂 (😭😭)

Then it will also crash the market since people will not downsize

@user760 ,

‘My parents bought a small 1960s house in 1970 for £6000. If you apply inflationary rises to that it would now cost £118,610 to buy. Those houses sell for about £125,000 if they are nicely maintained. That means the actual capital gain is probably zero since most home owners will have had to spend far more than £6,500 on a property in 55 years.’

That is unusual and, obviously, if you don’t make a gain, it isn’t taxed, and it should be indexed.

My parents, OTOH, bought the house I grew up in in 1972 for just over £120,000 and it is now worth approximately £3.6 million, whereas indexed by inflation it would be £1.42 million. And prime central London has way exceeded this percentage gain. (Sadly they sold it a long time before property really exploded).

It is this kind of gain that needs taxing (the gain after indexation).

Yes, that's what I meant above.

I totally agree, initially it would reduce income by billions every year in the first few years. The report that suggested this gave a figure of a shortfall of around £40 billion in the first five years compared to carrying on with stamp duty.

But if they were to make everyone pay this then that is going to turn even more people against them. As you say, if somebody has already paid stamp duty on a £600k house and is now expected to pay an annual tax as well that is not going to go down well.

In contrast though, anybody looking to buy a house between £250k and £500k (which is about 50% of all homes in the UK) will no longer have to pay stamp duty and won't face an annual tax either.

It's so typical that someone would interpret a post explaining how the younger generations have been disadvantaged as an insult towards boomers, with an added dig at Gen Z thrown in too. I've seen lots of similarly self obsessed, unpleasant remarks in other forms of social media. Perhaps these sort of posts go some way to explain why, if this sentiment is true!
Most Millennials and Gen Z won't be inheriting lots of boomer £££. A lot of it will be sent on care costs and the housing market is likely to fall in real terms anyway, then the inheritances will be divided between 2 or 3 children as the boomers had an average of 2.4 or so, I think.

Most people don't understand real as opposed to nominal gains.
If they did impose CGT on primary residences, and I'm not convinced they will, I expect it would be at a lower rate to take into account inflation, just as CGT is currently. I don't think 'the politics of envy' is a very useful phrase. It seems to be mainly used by wealthy people who resent the suggestion that they pay more tax on their wealth.

I lived in London for many years and know that you can still buy a 3 bed house in Zone 3 in SE London for 850K. I consider the parts of London where 3 beds are over a million to be the 'fancy' parts. It's all relative!

Your sums are still completely wrong!

Im afraid it's just the reality that most people will resent having to pay more tax.

Those who don't are always free to make a voluntary tax contribution. HMRC accept voluntary payments.