Mansion Tax at £1.5m - what will this mean?

[MaureenOHara]

Does anyone have any idea what this might mean for an individual and what it might do to the market. What happened to the £2m market and will that be replicated or is it different?

Yes that does seem to be the case.

@ThisOldThangthat value isn’t in the discussion & if it was values would go down.

That person in the 10 million pound house will have paid over a million in stamp duty.
So the person in the Darlington house will never pay as much as that, in his/ her lifetime.
On average a person up North costs more than a person down South - 73% of our debt is from The North.
So why are we trying to fleece more money from property owners in the SE and South? Why not concentrate on economical growth, to enable everyone to feel better.
And if more Southeners move up North, house prices will rise there too. Then you are in the same position as the South, where ridiculous house prices mean young people can’t get on the property ladder.

It’s not working. Labour keep having to add more taxes. When apparently it was all funded.

Why aren’t they looking at 2m houses outside of the SE?

Not really. I'm on just under £100k (gross including employer pension contributions). My wife only works part-time due to us having young children. My take-home pay is £4,450 per month.

Understandable, plus with stamp duty etc., you will never see your transaction costs back.

Quite a few friends and former colleagues are spending now - leaving little to nothing for HMRC on the way out, as it were.

I don't think you will be snared by it. I hope not, anyway.

Not really. They have more, they spend more. They will almost universally be paying more taxes than the rest of us. There may be the odd heiress who lives like a hermit of course.

@ThisOldThangI think you are very lucky that borrowing 5x & then another 100k didn’t backfire. How did you even manage that?

Hush now, it’s ok, it’s ok.

@FirmSnakeIm just thinking of my parents, in-laws, parents of my friends who all made ££££ from property. If they end up not circumnavigating IHT then they may pay more than some of us.

@Schlossadleryes I left off SD which is a biggie, we have already paid enough of that!

Living within our means. Having an 18 year old car on the driveway. No expensive holidays, etc.

We're not rich, but we've made sacrifices to get on the property ladder. The vast majority of people in London are in a similar position if they want to buy a home.

No doubt they’ll get rid of PPR for properties over £2m soon enough

I’m afraid you’re completely wrong. The disproportionate tax burden is on the top 10% of tax payers, not the top 0.1%: actually, although overall they quite clearly pay by far the most tax in terms of nominal amount, it is actually PAYE people in middle management/ professional roles who pay the highest % marginal tax rates, which are higher than anywhere else in the developed world for that level of earnings. No other country has such an irrational system with cliff edges creating perverse incentives, either. And countries that have decent services also charge lower and middle earners far more: that’s the only possible way to fund decent services because of the sheer weight of numbers of people in each category. It’s simply not possible to fund the kind of welfare and services that the UK electorate demands by only levying high taxes on the top 10% of earners and levying US levels of tax on lower and middle earners. Ultimately the UK electorate is going to have to accept it has to choose either a collectivist model like the countries whose services it covets (Scandinavia etc) where lower and middle earners pay far more and services are universal in order to maintain the social contract (e.g. Childcare funding) or a US style system where this level of services doesn’t exist and taxes are lower for everyone. The current UK approach of pretending that taxing people who earn actually quite moderate salaries that don’t buy a luxurious lifestyle obscene marginal rates and continually increasing these, while having one of (if not the?) highest personal allowance in the world and extremely low taxes on average earners is simply not sustainable, I’m afraid, hence our ever-increasing debt and failing services.

Some examples of reporting on the problems with the Government’s proposals and the tax cliff edges, which explain them very simply for non-economists with graphs, are included below

The wealth tax has failed everywhere. Why try it here?

https://www.thetimes.com/article/75591b39-7165-47cb-a295-4fdaf8eda601?shareToken=d558d51dffda25fd362b32647d2847e1

How many of Britain’s millionaires could afford a wealth tax?

https://www.thetimes.com/article/fefeb531-4732-4bc5-911d-82ca861b21e3?shareToken=f1dc221f469a44917c021f495869a080

Guardian article about the effect that punitive taxes and cliff edges are having on UK productivity at all levels of earnings. This is from three years ago, based on economic research commissioned for Jeremy Hunt, so you can imagine how much worse the situation is now! When even The Guardian is reporting the negative effect on tax revenues caused by punitive taxes outstripping the peak of the Laffer Curve, it should be obvious that the solution is not to double down on more of the same.

https://www.theguardian.com/business/2023/feb/13/full-time-part-time-work-no-longer-pays-uk-economy

There are of course numerous detailed economic analyses on all of these points backing up these observations. Dan Neidle has some good graphs here showing which tax cuts would actually increase tax revenue and economic growth. Unsurprisingly, of course Burnham is proposing none of these.

X · DanNeidle230+ likes · 1 week agoDan Neidle on X: "Our rough chart of the “bang for the buck” - GDP benefit per £ of tax cut." /

I could go on and reference various large scale studies in economic journals but it’s depressing to have to explain the blatantly obvious facts to people who will clearly continue to pretend trees are purple, the sky is red and the grass is blue regardless of any amount of data provided because it doesn’t match up to what they want to hear.

I don’t care whether you’d pay the proposed tax. The tax wouldn’t affect me personally regardless of whether they lower the threshold. It’s depressing that you seem to think only those who would be forced to pay it are objecting to it, rather than people who understand that it’s economically stupid as well as toxic and divisive and contrary to the principles of UK law.

The point is that it’s an economically bad policy that will negatively affect the UK economy and living standards overall like just about everything else Labour has done since taking office.

Well lower interest rates certainly helped!

What I meant is that I don’t think many banks would lend that extra loan now. Everyone makes sacrifices to get on the ladder but leveraging yourself like that is not something to be done in today’s climate imo.

Yeah, because there’s no houses “Oop North” over £1.5m 🙄

@LifeOnEnceladus you are correct but my understanding is that increasing tax on the lower & middle earners isn’t possible due to housing costs. Other countries don’t have quite as dysfunctional market as we do.

@MsSquizare all parts of the country included or is it just the SE?

It’s the whole country - at 2m threshold over 90% of the properties are in SE

Did you mean to tag me in your reply? I never mentioned the SE

Quite a lot needs to change for our economy to be made sustainable and productivity to increase, which is the only way to raise living standards sustainably rather than it just be a case of dividing up the remaining crumbs between warring factions. Fundamentally, it requires a huge improvement in the efficiency of spending, a coherent industrial and trade policy, investment in infrastructure and education and a very large redirecting of public spending from the old to the young. Over 65s are 15% of the population yet consume over 50% of public spending. This is why taxes are going through the roof, and there has been chronic underinvestment in the parts of our economy that will actually generate improved productivity, rising living standards and growth and some hope for the future. The longer this is not done, the worse the effect will be.

A good start would be to:

1. means test the state pension with a gradual taper rate like in Australia, so that it reaches zero when the PLSA income level for a moderate retirement for an individual/ couple is met (or assets sufficient to generate this income). This would create absolutely zero poverty because it is set at a level which allows for foreign holidays, running a car, eating out regularly, etc: the only impact would be that those pensioners who don’t need the state pension and are currently spending it on extra luxuries no longer receive it/ all of it. This would save £80-90bn per year - these completely unnecessary welfare payments to wealthy pensioners are by far the most wasteful part of public spending and it needs to stop. The quid pro quo can be no further raises in state retirement age. There is no rational argument for the status quo. The current generation of retirees are - on average - extracting £200k per person more in welfare and state services than they paid in tax over their lifetimes, in real terms. This is not sustainable and cannot continue. They didn’t pay sufficient tax to fund their demands on the current working aged population and neither did they provide anything like what they are demanding for their own parents and grandparents. It’s crippling our economy. Ceasing these payments to people who do not need them at all would create no poverty whatsoever, just upset a lot of pensioners who continue to claim that they have “paid for their pension” and that it “isn’t welfare” when all they have done is pay the tax required so that they aren’t breaking the law and go to prison and it’s been clear ever since the National Insurance Act 1948 that this is a welfare payments and - just like all welfare payments - the eligibility criteria and amount is subject to change (the PLSA levels are uprated with inflation every year and currently £31,700 for an individual or £43,900 for a couple after tax and housing costs - so far exceed the income of the vast majority of working-aged people who are paying NI, housing costs, childcare and have nowhere near this amount left as disposable income, so no pensioner would be left in poverty by removing their state pension at this level. When you consider that the recently-proposed cuts to disability benefit aimed to save £5bn per year and this measure would save £80-90bn per year, you can understand the scale of the problem and that it is pension welfare that is one of the reasons why the UK’s infrastructure and education system and all productive investment is falling apart. This ponzi scheme cannot continue and simply won’t, because it can’t, but the longer it goes on the more damage it will do and the harder it will be for the UK to recover, all so that working-aged people can fund luxuries and extra holidays for wealthy pensioners who are perfectly capable of supporting themselves, because politicians are scared to upset them. They need to get over this and do it - it should have been done decades ago). These pensioners funded nothing like this for their own parents or grandparents, and as a cohort paid nowhere near enough to fund it for themselves. They had decades where the collapse of this ponzi scheme was foreseen as an inevitability yet continued to vote for politicians who did nothing about it and demanded no change, and now state that it would be “unfair” to change it for those already retired. Ridiculous. It has to be changed and somebody needs to get a grip and tell them it is being changed, with immediate effect.

2. The above measure would enable significant investment in productive parts of the economy that have been starved of cash in which investment is essential to generate growth: education and infrastructure in particular. We need a lower proportion of people going to university and far more technical colleges with apprenticeships set up in conjunction with businesses leading to respected and useful vocational qualifications that lead directly into employment with the training employer, more similar to the German model. We also need to increase funding for schools by 50% to ensure smaller class sizes and a wider range of schools to suit different needs - some more academic in focus like the old grammar schools and some more focused on arts or sports or practical and technical skills. Trying to pretend all children are identical is ridiculous and we need to abandon the failed model of forcing almost all children into one-size-fits-all mainstream education which serves nobody well. Fund SEND education properly and put a proper regulator in place for education which will impose fines and sanctions and strip qualifications from people or even impose prison sentences when the law is broken, as is the case in every other sector (law, medicine, finance) rather than individual parents being expected to enforce the law. In the long run, the failure of education and enabling every child to reach their potential is going to cost us orders of magnitude more in terms of welfare, lower growth, higher justice and healthcare costs, etc, so underfunding education is economic insanity.

3. All responsibility for the provision of education and social care should also be taken back within the remit of the relevant central Government departments so that there is accountability, even if they delegate implementation tasks to Local Authorities. The recently mooted plans to redistribute Council tax across the country just add another layer of bureaucracy to achieve the same effective central funding outcome but with no accountability allowing central Government to blame Councils for the failures when they are underfunded and not capable anyway of administering these systems competently and this has led to a huge squandering of resources on ineffective systems designed more to try to circumvent their statutory responsibilities than actually implement the required services. Social care whether in the home or out of the home should be treated equally in terms of funding. General taxation can rise slightly to fund this and Council tax be significantly lowered with Local Authorities responsible only for local services such as waste collection, leisure centres, road maintenance, libraries etc.

4. The savings from point 1) also would enable us to remove the op-out for auto-enrolment and significantly increase the level of mandatory contributions for both employees and employers whilst making tax cuts to make this fiscally neutral and ensure that there is a stable pensions system in place for the future. A similar mandatory scheme should be introduced for the self-employed unless they can demonstrate sufficient levels of independent assets to fund their own retirement entirely independently. Meanwhile the Government should commit - as independent report after independent report into the pensions industry in the UK has advised them for years now - NOT to make any further changes to the rules around withdrawals, tax relief, etc because this is undermining any faith in people trusting the system sufficiently to invest their money into it, knowing rules might be changed in the future.

5. Abandon the failed NHS model and emulate on of the far superior European models like those in France or Germany which have been shown to deliver far better patient outcomes and value for money. People would get treated in a timely manner, healthcare would vastly improve. There is a reason why no other country in the world has emulated the NHS system and all of the countries that have better health outcomes do not use a system like ours. Every time this is proposed ridiculous people try to pretend that changing it would mean we were moving to a US model which - again - nobody else in the world has copied for very good reasons. There are very good models between these two extremes that actually work and won’t bankrupt the country.

6. Rejoin the single market and customs union as quickly as possible and implement a coherent industrial strategy and trade policy, focusing on Government support for start-ups in key high-productivity sectors where the UK has an existing competitive advantage and knowledge base (tech, pharmaceuticals, engineering, the arts, finance and professional services, defence, life sciences etc) linking these up with grants, research from our best universities, knowledge clusters and business support networks including a new Government export assistance service for small businesses to help them overcome the costs of legal hurdles and compliance documentation with templates/ paperwork assistance etc.

7. A huge investment in our failing infrastructure (water, internet, road, rail, housing - but with acceptable standards for homebuilding unlike now) and plans for food security, water security, energy security, climate change protection (e.g. flood defences). We currently have some of the very highest energy prices in the entire world. This is hugely harming economic growth. The energy pricing model is completely insane, where all units consumed are priced based on the most expensive energy units in the national mix at a given time. This is entirely artificial and perfectly possible for Government to change instantly. Meanwhile we need to invest far more heavily in Nuclear alongside renewables to provide reliable baseload for the future (thanks Nick Clegg for declaring 15 years ago that it wasn’t worth bothering because it wouldn’t be online for 15 years, when at the time the UK could borrow at negative interest rates, i.e. being paid to borrow the money to build our infrastructure). The economic illiteracy has gone on for a long, long time. While day to day public spending needed to be cut after the financial crisis, we should have borrowed HUGE amounts to invest in infrastructure because we could have done so at a profit before even having build anything!). Energy prices are crippling our businesses and making them uncompetitive. Importing a large amount of essentials commodities like energy makes us extremely reliant on FDI and imports inflation. Markets will be favourable to a coherent long-term investment plan in such areas because of their impact on long-term productivity and growth rate therefore this would not negatively impact the UK credit rating. This would also generate more highly skilled jobs and demand for the apprenticeships per point 2).

8. Stop selling indexed links gilts! Most comparable European countries have a tiny amount of their debt issued on an index-linked basis and are therefore paying much lower interest than us on similar debt levels. This was gross economic mismanagement.

9. Fix the ridiculous UK tax system which is harming productivity. These points are not in priority order and frankly this one should be done immediately because the effect would be almost instantaneous unlike some other items on the list and it is entirely within Government control to fix. Anomalies and perverse incentives little the system at every level. All taxes and welfare should be levied on a household unit basis, as in pretty much every other developed country. Couples could choose to opt out and be separate “household units” splitting their household tax allowances/ thresholds between them equally if they wish to maintain separate finances. Obviously those in HMOs or adult children living with parents would be separate “household units”. This is how the system operates in all sensible countries of which I am aware. Then two households with the same household income will be taxed the same amount regardless of whether they’re a single parent or couple or how the earnings are split between the adults. This is a matter of basic fairness. Income tax does need to rise but this needs to be through the basic rate (due to sheer mathematics). This should be done transparently by simply changing the rate. Fiscal drag is economically damaging and a commitment should be made to uprate all tax thresholds annually with inflation.

10. As well as the above, the cliff-edges in the tax system need to be removed. Child benefit, childcare funding and the personal allowance should be made universal again, and the universal credit taper rate reduced significantly because there is robust independent economic evidence demonstrating that this would generate more economic growth, reduce long-term welfare dependency and raise tax revenues and economic participation rates significantly. This would also reduce the number of people cutting their hours/ retiring early/ emigrating and therefore reduce skills shortages and the need for immigration. Rationalise the tax system so that pensioners pay NI given they are by far the highest users of welfare and healthcare which it was supposedly meant to fund (obviously we all know it isn’t hypothecated and does no such thing anyway, but there’s no reason they should be exempt). Adjust tax rates to reduce the discrepancy between the level of tax on earned income and investment income (some is justified to generate investment and risk taking, but the current level is too extreme with employees being taxed far too heavily proportionately). There’s absolutely no excuse for this Government or the last one not to have taken the measures in points 10) and 9) to fix the tax system given the very clear evidence of the economic harm that the current system is causing, suppressing growth and productivity. And certainly no excuse to be telling us they need to make “tough decisions” and make cuts/ raise taxes without taking these measures first. Restore the social contract: the quickest way to undermine public services entirely is to exclude those who are actually paying for them from using them. They will be paying their share AND for many others to access the same and in most European countries that is accepted and it works. If you start excluding higher earners from childcare funding etc you create perverse incentives in the tax system, discourage work from our most productive people, and condemn those public services to perpetual decline and cuts and well as creating further social division.

11. Link up Government IT systems properly so that healthcare records, HMRC records, DWP records, CMS records are all linked together. Ask the Estonians if we can buy their integrated IT system from them given our Governments are so terrible at IT projects. This will enable much easier identification of fraud and tax evasion. Digital ID cards should be required and added to traders’ invoices so that their transactions are logged and they cannot do “cash work” and under-declare and make it an offence to pay for work over a de minimis value without this digital ID number to stamp out black market. These ID cards can also be used to reduce black market working generally. There is a huge amount of tax evasion going on. Implement a system like those in other countries where absent parents who don’t pay something resembling 50% of the cost of housing and raising their children (not the laughable current CMS rates) have their driving licences and passports confiscated and if they still don’t pay then they will be sent to prison i.e. treating these debts with the same severity as money owed to HMRC.

12. All benefits other than disability benefits should be contributory like in most European countries, so that they resemble the insurance-based system that they were intended to be. This would enable them to be set at a level where they are a percentage of previous salary, again in line with most European countries, so that they do actually provide a genuine safety net for all sufficient to cover their baked-in existing living costs which is important for the social contract (and those with higher costs will have been paying proportionately more tax to fund this while working). This will also prevent people claiming unemployment benefits as a “career” without ever working at all (unless severely disabled). Benefits like the child element of UC should be replaced by an additional tax allowance based on the number of children (again, a model that’s worked well in other countries for decades) because this encourages work rather than disincentivising it, while still recognising the additional costs involved in raising children.

13. Implement something akin to the EU Directive on Tax Transparency which Brexit was largely designed to avoid being implemented in the UK, requiring publication of the beneficial ownership of all accounts held in UK offshore tax haven territories. Reform rules around transfer pricing which enable large companies to move profits abroad and transfer costs into countries where revenue is generated to eliminate their profits. Reform the rules around dividend distribution linking them to the requirement to provide disclosures on long-term viability so that a company cannot make distributions unless it can demonstrate sufficient cash is being kept in the business to meet long-term investment requirements (e.g. water companies needing to invest in infrastructure as population changes/ upgrades are required).

There are obviously more changes that need to be made but these would be obvious first steps for a Government genuinely wanting to generate growth and rising living standards. None of it is rocket science.

@LifeOnEnceladusimpressive

So in one part of the country someone can have a huge house with masses of land that they own outright, and pay no tax. But in another part of the country someone who has a heavily mortgaged poky three bed terrace with no garden, has to pay tax for being too rich. And we're supposed to pretend this is somehow totally fair, and not an outright attack on the south by some bitter, economically illiterate, divisive little incompetent who proudly admits his political inspiration is the government who bankrupted the nation? Okey-dokey then.