Burnahm Land Tax Replacing SDLT

[maureenponderosa]

https://www.standard.co.uk/news/politics/andy-burnham-tax-london-land-value-council-stamp-duty-b1286586.html

While I think this is overall a very sensible approach, and do think Stamp Duty is a tax that discourages market movement, I’m a bit worried about this.

We moved recently. Paid £30,000 in SDLT. It will be so galling to have to then pay a stamp duty replacement tax when we’ve already paid so much in stamp duty.

I wonder how this would be rolled out. Would it apply to all purchases after a certain date or to everyone whether they’ve already paid the tax or not.

Hoping it would be the former.

Any speculations?

Headline mentions London but we’re nowhere near. Very rural. No London salaries.

I don't get it. In scenario 1 the Govt get "£20k straight to the tax man". In scenario 2, the new owners pay a much smaller figure annually for the next umpty years.
The Govt can't afford to lose the cashflow. They need money now, not in some rosy future.

You will pay LVT now and every year until you die. The housing market is stagnant in many areas so they get money even when no transaction are happening.

Well you say thats hypothetical but you know there are people in cheaper areas/cheaper housing where their CTAX is multiple times more than some 1 million house in particular London boroughs due to the disparity in how local tax is calculated.

So I wouldnt have confidence that someone with a cheaper house pays less

I think stamp duty is much fairer than what is being suggested (who knows if it will ever come into being) because like others say, if you choose to buy a house you choose your price according to your budget. You cant do that if you already live in the property and your income stops but your liability keeps ramping up year on year.

Salaries won't matter, OP. A land value tax doesn't necessarily take account of your ability to pay. If your property value rises but your income doesn't, the bill will still arise like clockwork!

I suspect that people who can't afford to pay immediately can defer the tax. Labour probably just charge a fee or interest on the loan they have effectively extended to you. The bill will then just continue accumulate until the property is sold or the estate is settled. The prospect of getting into debt or selling your home to fund government spending, seems fair, doesn't it?

I just think this is too big a project - fine if this was 20 odd years ago but at the moment there are other things that need fixing first

I just want to reiterate that the land tax would be completely shit for us because we’ve just paid a huge SDLT bill.

Because house prices have risen so steeply, especially when compared to rises in average income, SDLT is now a very difficult tax to pay up front. So I can see how a replacement annual tax might be more appealing and increase market activity.

Again, for us it would be shit. I don’t want it. I just see how it could work for some issues.

Agree with those saying it shouldn’t be a priority though.

How are they calculating land value anyway? What if it changes which happens all the time? It goes down because, for example, a huge local employer goes bust? Or what if a new train station is built just around the way so the value goes up?

The flat market in London is really stagnating. I know a few people who have moved in with a partner and can’t sell their own flat for love nor money. A few are now renting it out at a loss.

eta if it is the value of the land rather than what is built on the land - you are screwed if you are in one of the blocks with dangerous cladding that can’t sell

You have money and the need to give it to someone else.

That's about the sum of it.

@maureenponderosa

anyone whose already paid stamp wouldnt pay it
It would just be for new purchases

I agree. We paid £75,000 in SD just two years ago. I think that’s quite enough unless they’ll refund it.

He must have been reading the discussions on here over the years about replacing CT and SDLT with a HVT and Poll Tax. Great news if he has. SDLT is one of the most daft taxes ever conceived. It's an unnecessary friction on moving and mobility, and irregular during times of boom or bust.

An annual HVT should be relatively easy to implement. We've been capturing home values on the LR since 1995 and only have (guess) a third or quarter of properties left to be added. This can be done with a one-off sweep up exercise. And we'll also capture all the non-dom owners. They either own up and pay, or forfeit their property.

It would be relatively easy to include some relief and/or mitigation to recent SDLT payers and cash poor widows, etc.

Someone mentioned the tired old trope about North and South. It's not that easy. Compare deprived ares of Cornwall with Harrogate and Manchester.

This has me concerned. I've run some numbers.

The cheapest houses in Wandsworth are about £600k
If the land value tax is 0.48% (as per the article) then tax will be £2880 per year.
Currently band D council tax is £1,020.35.
So those living in the cheapest houses will need to find an extra £1880 per year. That could tip those families over the edge.

At the fairly typical £1.2 million Victorian terrace level the tax would be £5,760 per year. Those houses are probably band E or F, so currently under £1,500 per year council tax. So an additional £4000 per year.

This is a lot extra per year. But then looking at the lifetime cost:

The £600k house would currently be liable for 20k stamp duty.

The £1.2m house would currently be liable for £63,750 stamp duty.

So if you move every 10.5 years you equal out at the cheap end, or 16 years at the £1.2 million mark.

I do agree with the principle, but it hurts to see the numbers.

Also I've not moved in 15 years due to the cost of moving (and the next rung up) so this policy would negatively impact me personally.

A quick look around the country at other higher council tax charges makes this look less of an impact for those people. The LVT would be much closer to the current council tax rate.

Wandsworth has almost the cheapest council tax in the whole country so the difference will be stark. It won’t be such a big jump for other areas. Plus if you’re in a £1.2 million house, you’re likely to be comfortably off (unless you maybe bought it decades ago on a ‘normal’ salary).

Many will struggle to find the extra

It’s not going happen. Don’t think he realises how few people have money or savings to pay yet another x thousand.

We take home 5.5k. Last year we had 1.5k spare each month. This year we have none due to increase in fixed compulsory costs (mortgage, water, energy, council tax, insurances etc. So actually we are in minus because we are in contract still for a few ‘luxury’ things we will have to cancel.

Basically that’s a ramble. In short. Last year we were spending well on discretionary AND saving 12 k a year. This year due to all the increases we are in deficit. All that 12k savings is nearly gone.

You would equal out much quicker as the tax is based on current values going forward. Not what you bought it for years ago

Agree
Many people won’t have the extra money
but I fear it will be introduced. They have said anyone who can’t pay can defer until they sell or die. ( and The debt would incur interest )

I don't agree with the principal of a land value tax.

How about we stop looking for new ways to tax the same people, their single home and the assets they are trying to build, or have spent a lifetime building, and start looking at how to encourage the right behaviours?

It's not rocket science. Reward work. Reward saving. Reward training. Reward people who plan ahead and take responsibility for themselves and their families. Support those who genuinely cannot do these things for themselves.
Labour love to talk about levelling people up, yet since coming to power they seem determined to shame many of the very behaviours they, and successive governments, spent decades encouraging: self-sufficiency, home ownership, saving for the future and long-term planning.

It isn't wealth hoarding to own a home. Everybody needs one home. The fact that home ownership is now out of reach for so many is a failure of government policy, planning and regulation. Fix the causes. Build more homes, not just more so-called "affordable" homes that often aren't affordable to the people they're supposed to help. Create policies that genuinely help first-time buyers. Make downsizing easier and more attractive for older homeowners. Most don't need financial support, but they do need practical options and fewer barriers. Penalise speculative and investor-driven demand.

Sensible intervention is needed, not weak policies dressed up as solutions. If we get the fundamentals right, prices will take care of themselves.
If we want a stronger economy, we need to increase productivity, create more wealth and do a better job of targeting support at those who genuinely need it. It is madness to think we can keep redistributing the same small pie and somehow become more productive and more prosperous.

Not sure that will go down well politically.

Yes. I agree
although not just politically

Isn’t this a similar model to property tax in the US? I can’t see it happening, by the time they’ve figured it out we’ll likely have a new government and other crap to deal with instead.

I’m no fan of stamp duty and think the rates are way too high but at least they get the cash in.

this just highlights the art of public finances - they don’t actually care about cash if they can put in the forecast they will be getting X in this time. It’s like freezing the thresholds - it gives them room to play with and I think if the forecasts went well they would unfreeze earlier than planned. Sadly I can’t see forecasts getting better