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?

Strange then that as soon as rates went up the brakes went on? It was a deliberately designed debt experiment to get as much secured lending into the economy as possible, the "regulators" just played their part, but no one forced the public to borrow too much that is the crucial step that the bubble lives or dies on.
If you want to pretend that people were not giddy on the free money and how much they thought their house was worth that"s fine, but it is not how it happened, sure some people needed to buy a home and they were corralled by the prevailing prices but the difference is that back in the early stages of the bubble people were openly bragging about how much mortgage debt they had.
Now there is a generation who have realised that if they stay at home longer and avoid massive mortgage and education debt they are much better off, so IMO there is definitely a large element of public awareness involved in these things.

if what we are trying to do is simply make the rich pay more then increasing the income tax percentage is a far easier way of achieving that aim.

Properly rich will just use offshore/creative accounting, they won"t pay, Property rich are just a side effect of a global credit bubble, they are not really rich and the houses are now fast losing value.

Targeting home ownership for a wealth tax is the worst way. Far better to tax gold bars!

the super rich will always find a way to avoid tax but if they can be encouraged to set up and live here at least we have a chance of building an economic nexus. If they are buying their expensive products here they can’t evade VAT!

“deliberately designed debt experiment”

I am confused now. You appear to be moving towards what I was saying - namely that there were other more important factors at play. After all the people buying the houses are surely not the ones who designed the debt experiment.

All the "brake" showed is that there is price sensitivity. That's hardly rocket science.

Also most of the people staying at home are saving for a mortgage rather that struggling to pay extortionate commercial rents and save. I guess they don't have the network that you have to find the abundance of cheap rentals available in London.

Have nothing and be happy and leave others be.

You have no idea that most people at home are "saving for a mortgage" many are probably saving to go abroad and set themselves up as "influencers" or "digital nomads", having a mortgage debt is no longer the Holy Grail it used to be.

Obviously Joe Smith with ten BTL"s in Blackpool didn"t design the global cheap debt banker experiment, that was done by people in tall buildings in New York and London and sitting in "offshore" tax havens, but he chose to participate, to go balls deep on the cheap money, to gamble that there would always be a plentiful supply of immigrants or students or people on benefits, that part is on him.

I stand corrected, around 1 in 6 23 year olds are living with their parents specifically to save for a house deposit.

And almost a quarter said they were still living at home because they couldn't afford to move out. So where exactly are all these cheap rentals you mentioned?
Gen Z more likely to live with parents in early 20s than previous generations | UCL News

So they asked all the 23 year olds in the country? Ask the 5 in 6 that live away from home where the affordable rental is. Again I am not entirely clear what point you are trying to make?

@BananaPeels "next thing you know you will make a comment about people who can afford such large mortgages won’t notice the extra cost"

Your crystal ball has let you down again.

@LifeOnEnceladus

"It’s the first time in history, I believe, that a Government is (allegedly) considering lowering the threshold for a tax before even implementing the original version!"

I'm sure governments consider all sorts of things all the time.

However I have seen no signs of a government proposal to create lower bands for the High Value Council Tax Surcharge.

Have you?

The advantage of taxing houses is that they are very easy to see, and very difficult to squirrel away in an overseas tax haven.

Yep. Because otherwise we'd have the poll tax.

And we all know where that ended up.

People with large houses already pay more for local services. In the same way people who earn more money pay more for defence.

When the Tories implemented it they didn't get it quite right (probably a sop to their voter base). Labour now have the opportunity to correct it.

This method is something of a bodge (it should really be done by adding in extra council tax bands) but is better than nothing.

Or in lovely gold bars, or expensive watches. Or whiskey and wines….

In theory it is based on the unimproved value of the land with whatever zoning laws are in place on that land.

So if you owned an empty plot that had planning permission to build a 10 story apartment block then that would be worth more than an empty plot that could only have a single dwelling and your tax would be higher, this is a positive thing because it discourages developers from land banking and doing nothing.

If you had a normal house with garden, then the taxable value would be what that sized plot on that street would be theoretically worth if it had no house on it (given existing zoning laws and any planning permissions). This is good because it means you can improve your property and extend your property and your tax doesn’t go up. You’re not punished for investing in your asset.

It would for sure be more complex to manage and more open to disputes when the value is inevitably set at the wrong level for some properties. But we have so much data available now, so I don’t think it’s an impossible task.

The one benefit of stamp duty is that it’s very clear cut, you’re paying a percentage of a transaction. But just because it’s easy doesn’t mean we should indefinitely ignore all of its harms.

Probably what will happen is they will instead introduce a lazy property value tax (rather than an unimproved land value tax) so people will be taxed more the more they improve their property, which will suck, but at least slightly less than stamp duty.

I have absolutely no faith in any UK govt doing something sensible and well thought out!

Stamp duty is already extremely high at the upper ends.

The idea was that stamp duty puts people off moving and getting on the ladder/moving up it, because it requires an upfront cost that you have to save for, over and above the deposit a lender required. It has substantially altered transaction costs for all. Many were hoping it would be replaced with something that is spread out over the life of a house/flat so as to help people get on the ladder/move up/downsize etc.
What they are instead proposing is a potential further distortion at the upper ends which makes no sense rationally as it seems a small amount with a large potential to create chaos in valuations and transactions.
Really they should just say we are creating further councils tax bands I J and K etc as at X date. But they won’t because clearly they don’t know how many extra ones they want to create? And that is what is worrying. Doing it the way they propose means they do intend it to shift downwards to cheaper properties and people are not idiots. They tend to be one step ahead of what any government propose.

Someone in a £1.6M house, on a lower income (who has for example seen their property value rise because of their postcode), who wants to defer for say 10 years before selling, would pay about £30,000 once the actual sale goes through.

thats not a lot of money in the grand scheme, not on a £1.6M property. So it's not worth worrying about.

It depends on the mortgage situation surely

If someone is on a low income £35,000 and their property is worth £1.6M how likely are they to have a mortgage? They are likely to be in the older age bracket, having lived in the property for decades when it was worth a fraction of that value, and seen prices rise since the 1980s. They are highly unlikely to to have a hefty mortgage to pay off.

What sort of person are you thinking about?

Yes, but I thought the government needed the tax revenue now, I know they can do funny money accounting etc. but don"t they at least need to pretend they are collecting something? LOL

collecting chicken feed to satisfy Ghidorah

How high do you think this tax is? It’s less than the council tax itself in my area for a band C house, and it should be peanuts for anyone with a £1.5 million house.

The idea that people are going to care about £2.5k a year is laughable. If it gets a few old, house poor pensioners to move out of their massive empty house, all the better.

That's as maybe, but if someone is earning a low amount they will not be able to afford the £2-3,000 additional cost on top of their Council tax so the government has had to concede that some may need to defer until either they die and it's paid retrospectively from their estate or they pay it from the proceeds of their future house sale.

Not everyone will be in this situation so the govt will get revenue from the scheme if someone doesn't move and has the means to pay.

That’s just spiteful. Why should they move out of their homes, their community and everything they know, just to pump more money up North?

They could live in a smaller flat/house in the same community? However no one is going to buy their house at that price point now and risk the high CT and the AB Keep the dossers well fed with booze and Weed tax, so it is a moot point. All Labour"s plans are just Fantasy World thinking, it is all going to unravel, I just hope that AR leads them into the next GE, that is a train wreck I will pay to see, shares in Popcorn to the Moon.

Still not sure how a house pays the tax, lodgers maybe?