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?

I agree wrt 'mansion' tax. I think it's a terrible idea for that and a number of other reasons, not least that the government and civil service is so completely incompetent that there is no way valuations will be completed fairly and equitably.

But I do get tired of the often-touted on this site narrative that 'people who live in the south are so screwed', when actually the creation of wealth via insane house price increases is a major benefit for many.

"What incentive is there to work in that case at all."

To eat, to pay your big mortgage or rent for shelter?

The asset is only worth what someone will pay, it reduces as interest rates rise and also is reduced by tax policy like this, it is not like money in the bank, and to get cash from the house you would need to downsize or live with a relative or something?

Yes I understand that, and my earlier response confirms that I agree the 'mansion' tax doesn't work for this and other reasons. But the fact remains that there are a large number of people who have and are benefitting hugely from house prices in the south, whether they immediately liquidate the asset or not.

well there’s no way to avoid losing a chunk of your house value to tax at some point if you intend to continue living in an owned house in this country - either care home fees (which I don’t object to) or IHT if the house is worth 1.5m

The mansion tax does work to reduce house prices, which is obviously their aim?

I don’t think most people do benefit unless they liquidate and move somewhere far cheaper and live off the gains and have a party with it. Most people are far too good little citizens and at best leave it to their children who need it to be able to stay where they grew up and stick around their own parents in old age to provide support. So the downsizing is often done locally to help a child onto the ladder. But how many people in advanced age realistically go let’s sell the 4 bed “mansion” in Shoreditch and all go to Thailand/Dubai/Ibiza etc wherever and splash the cash. Maybe more people should do it. You would get great health care and care in Thailand at a fraction of the cost.

Yes it’s not that beneficial. It’s a very high mortgage cost and if you want to move within London or close enough to keep jobs it’s the same again.

So how are this hapless bunch of fuckwits going to arbitrarily pick a moment in time and decide what a house is 'worth'. Anything on the border line of 1.5m clearly won't be worth that any more once saddled with the additional tax yet will still be stuck with that liability for evermore

The other issue with a property tax like this is that whilst some people buy property as investments, most are buying a home. DH and I have been fortunate to build up to our family home which we’ve owned for 15 years and the value hasn’t gone up that much but it’s our home. We will most likely sell once the kids are independent but we won’t move areas as this is home. So yes we will liberate some capital but once you’ve knocked off stamp duty and other costs it’s not going to be enormous

Although I’m interested in how this interacts with leasehold. If you own a leasehold flat on a 150 year lease and it’s currently worth £1.5m - well that value is only going down surely?

It's perfectly possible to partially liquidate assets.

Equity release, remortgaging or lifetime mortgages are all possible.

Government has also proposed schemes where the extra tax can be deferred and accumulate as a charge on a property before it is sold.

So there are multiple solutions for the (very) small percentage of people who wouldn't otherwise be able to pay the tax due to lack of liquidity but want to remain living in the house.

Equity release, remortgaging or lifetime mortgages are all possible.

and costly - taking on debt to pay the tax is not wise

Indeed. It won’t just be a one-off valuation exercise: for many properties it will be an endless series of expensive legal cases so highly likely to cost more to administer than it raises. Idiotic.

For the majority of working-age people especially those under 45 or so it has not been a source of wealth, rather a very large cost which significantly decreases their standard of living. Some are now going to have that disadvantage compounded by tax on their mortgage debt.

It was done in the past with council tax, the bands are way out of date and have been for decades. They will do anything other than cut the welfare bill, my hope is that the bond market calls time on them, but then of course the "million pound mansions" will be worth even less. Best bet for people who like their high house price mortgage free with minimal costs for services would be to vote for the bloke with five houses?

Yes, late entrants to the property Ponzi are going to get absolutely hammered.

why not abolish council tax completely and increase income tax if you want higher incomes to pay more? Realistically if you have a high value house you have a high income so why bother with this costly and messy solution when there is an easy one available.

council tax is merely local people paying for local services. It should be on a person by person basis. Your house value shouldn’t come into it.

"Realistically if you have a high value house you have a high income "

This isn"t true, plenty of people renting have a higher income than an older person in a large house, hence the fuss about this proposed tax.

Do people on benefits pay council tax?

I think no, they get a discount, often of 100%.

The council make up the missing payments by charging working residents enough to cover the shortfall I guess ?

I agree to an extent about that group of older people but lots of people have said on this group that those people who have huge mortgages on these high value houses must have a high income to satisfy the mortgage and therefore should be able pay the extra council tax. If that is the case why not just abolish council tax and put income tax up? Save all the admin burden.

Many people took out massive mortgages when rates were nearly zero, they can"t afford the mortgage now let alone the council tax.

It’s not nonsense. Ignoring what they are doing is nonsense. If my auntie had bollocks she’d be my uncle is nonsense.

Maybe the budget will prove us wrong, but I doubt very much Labour’s are going to do anything radical to boost the economy.

Tax, spend and borrow is the only show in town.

Makes sense.