New stamp duty rules Post Reply

[actuallyadad]

"Remind me how much of the wealth is owned by the top 1% of the country?"

But do you think the top 1% of the country lives in the terraced houses just off Northcote Road?!

This is why mansion tax is clumsy and hits the wrong people

[AbbevilleMummy]

I completely hate the mansion tax, but @actuallydad I think you will find that those living within the terraced houses just off Northcote Road are within the top 1% of the country's highest earners, probably top 0.6%.

Taken from this BBC article http://news.bbc.co.uk/1/hi/8151355.stm

"But the standard that has cropped up in newsprint over the years is "the top 1%". It takes £118,027 to get into this bracket. And if you are earning £150,000 - the amount that triggers 50% income tax - you are in the top 0.6% of salaried people, according to the ASHE."

I know that most families BTC would struggle to pay the mansion tax because they either bought their home many moons ago when the area provided good affordable housing, or they have bought recently and are mortgaged up to their eyeballs, but it is very easy around here to forget that the vast majority of the country have significantly less.

[actuallyadad]

gosh that's interesting, must admit I didn't know that, thanks for sending the link. But of course this is only salaried people, the really wealthy in this country are self employed. Also I suspect that it does not properly reflect people who have "salaries" of say 80k, but bonuses of multiple times that meaning a large total package (this is how many city jobs work).

I'm not saying it's a poor area, but I don't think the country's real elite live in Northcote road (south of the river has improved a lot sure, but Knightsbridge shouldn't worry yet!)

[AbbevilleMummy]

Mungo I was with you for much of this thread but you lost me at "

The vast majority of the country don't have the overheads involved with working in and living in London - housing, travel costs etc. They also don't have the desire or ability to do the sort of jobs you need to be able to afford a nice house in Wandsworth.

Getting ever so slightly out of touch with reality now.

[TFP]

Julien,

How potentially devastating for you and your neighbours - you deserve a lot of sympathy from others in equally unfortunate positions.
Could you remind all how much you, and your neighbours paid for your houses, and how much they are worth now? Could you also explain if you ever intend to pay tax on the increase and when ? Remind me how much of the wealth is owned by the top 1% of the country? How would you rebalance?
Quirk of geography - what about the rest of our country?

yep, that's the thing. if a "quirk of geography" gifts you, say, a million pounds, a few hundred thousand pounds, whatever, and then the taxman decides to tax your wealth at a rate of about 1% p.a., the fact that you've enjoyed this huge windfall is kind of, well, a bigger deal than the fact that you're paying tax on it.

my sympathies would lie much more with someone who owned a valuable house but who'd paid through the nose to buy it, and only then by virtue of a whopping great mortgage. said people .

I'm with you julian on the mansion tax - how is someone who's owned their house for 40+ years, lives on a pension, can't get a mortgage, supposed to pay it? Yes they may have a valuable house but practically they can't access that value...

this is a trivially easy problem to solve, as per the Labour proposals, it'd just be basically a type of equity release thing, which is very common now.


a mansion tax certainly has its disadvantages, the need for reasonably accurate, up-to-date, valuations [in a way that's not true for stamp duty, whereby the market provides you with a valuation at the time of sale, or income tax] being the obvious one, but it makes me a little, well, sad, to see vested interests also chucking in disadvantages that aren't really disadvantages at all in any meaningful sense.

taxing houses has a lot to commend it over taxing income. taxing houses doesn't provide a disincentive to work in the way that income tax does. taxing houses makes evasion practically impossible if the tax is payable no matter what type of individual or company owns the house [in a way that's not true of income, which accountants can move around, reclassify, etc, practically out of existence]. taxing houses [own opinion only] is 'fairer' than taxing income because generally speaking property wealth is less closely correlated with effort and ability than income is.

[actuallyadad]

Taxing houses has exactly the same disincentive to work as taxing income! Why work to earn money and then be taxed further on what you spend it on?! No different.

It's over -simplistic to tax things just because they have gone up in value. We have to allow people to make investments. The next logical step would be to tax all assets which appreciate. If you go down that route who knows what's next - wedding ring tax as the price of gold increases over years...?? It's all a bad idea.

[gruffalo's dad]

I think Lidl or aldi ( can't remember which ) were in the news for not actually paying UK tax.

This is not true. As entities that are physically trading from hundreds of locations in the UK it's a bit more difficult for Lidl and Aldi to avoid UK tax than companies like Amazon that claim their sales are all made from outside the UK. Of course, one can "do a Starbucks" and load the UK company up with intra-company debt the interest on which offsets any profits, but neither Aldi nor Lidl do this. The UK operations of these companies pay an effective rate of corporation tax of 20%, which is similar to other UK supermarkets. In fact, it is Tesco that has been doing the crazy financial engineering with its numbers, albeit more to artificially boost profitability than avoid tax as such.

Here is a BBC article from July of this year on Lidl's UK tax bill: http://www.bbc.co.uk/news/business-28416081

[TFP]

Taxing houses has exactly the same disincentive to work as taxing income! Why work to earn money and then be taxed further on what you spend it on?! No different...

no, it's very, very, very different. taxing income has very real and immediate incentive effects.

e.g. if you levy high income taxes on the low paid then their incentives to stay on benefits are much stronger.

similarly the 50% tax band when it arrived prompted lots of squealing about workers, or whole jobs, moving to foreign shores. some of this may even have been true. more obviously it may have encouraged gary barlow style 'creative' approaches to pay.

but a house in say nightingale square isn't, if a mansion tax comes in, going to stomp off to say mitcham or west croydon in a huff because it doesn't want to pay the MT. that can't happen. similarly the tax couldn't be avoided by a rich family deciding to go for a paper reclassification of a residential house as something else, or by buying it through an imaginary company, or whatever. it's one of the great advantages.

you might be suggesting that people simply won't bother to work hard if all that's waiting for them at the end of it is a mansion tax, so we'd see would-be magic circle partners saying 'sod it' & working the tills in Lidl instead. this isn't hugely plausible. london housing costs have easily doubled in the last decade & a bit, easily, but i haven't detected much of a drop-off in the number of young graduates looking to get jobs in banks. have you?

a plausible effect i suppose is that a family considering upgrading from say a single-fronted 4 bed house on say the Heaver estate to say a double-fronted 5 bed one say between the commons might decide against it, or else only be prepared to make a slightly lower bid for the bigger house. neither of these outcomes feels to me like a very bad thing.

...It's over -simplistic to tax things just because they have gone up in value. We have to allow people to make investments. The next logical step would be to tax all assets which appreciate. If you go down that route who knows what's next - wedding ring tax as the price of gold increases over years...?? It's all a bad idea.

the wedding ring analogy might be a good one if, say, bad government policy had led to hundreds of thousands of ring owners getting unearned 6- & even 7-figure windfalls, wedding rings were immovable, & there were zoopla style wedding ring websites that told you exactly how many wedding rings there were in a street &, less exactly, what each was worth on the current market. for the time being though it's far from a good analogy.

[AbbevilleMummy]

I simply can't see how the 'mansion tax' could possibly work in our economy and tax regime. Fundamentally, you can't tax unrealised gains. Whether those gains are on a stocks and shares portfolio, pension fund, real estate, whatever, as the market is constantly fluctuating and therefore gains or losses can't be assessed until they are locked in and realised.

If the UK wanted to earn more revenue from taxing increases in property values over and above stamp duty then the only realistic way would be by removing the exception from CGT on principal residences.

This would be tough (and I'm certainly not saying that I'm all for it!), but it would be in line with other countries.

[Astolat]

The average UK salary is £26.5k The average London salary is £35k. The average UK house is about £270k. The average London house is £517k.

These numbers take into account the extra costs of living in London - by having higher average salaries etc.

The top 1% of wealth (assets - i.e. houses, investment, savings, pension pot etc) starts at £670,000. So if the equity in your house plus your pension pot equals that YOU ARE IN THE TOP 1%. So are Kensington and Chelsea residents - they are maybe in the top 0.5% but don't kid yourself you are in the middle.

So if you are living in a £2m house between the commons then you are very wealthy - Your house is worth 7 times more than the UK average and 4 times the London average.

If you earn more than £35k then you are better off than the London average. If you earn more than £60k you are in the top 10%. My guess is that most of the people in £2m + houses earn a significant amount more than that.

You just need to look at the topics in the new posts section. Private schools, Granite worktops, loft conversions, Performance drama workshops, family gym memberships....

I get that no one loves taxes and no one wants to pay more tax. But please be honest - you want to keep more of your cash to pay for nice stuff. Don't dress it up as being 'cash poor'. People in Wandsworth are going to food banks and skipping meals to feed their kids. That's cash poor.

[AbbevilleMummy]

Couldn't agree more Astolat. Very well put.

[actuallyadad]

yes I definitely want to keep more of my cash (which I earned and paid tax on) to buy nice stuff. Not sure why anybody would have a problem with that?

[TFP]

...

yeah, fair enough.

earning £160k puts someone in the top 1%.

i don't really mind the UK English [as opposed to say US] ultra-widespread use of the term "middle class" whereby [say] a £25k a year northern daily mail reader & a £250k a year [and the rest] london financier can both use the term, entirely straight-facedly, to describe themselves, despite the fact that each would barely recognise the other as being of the same species should their paths ever cross.

but it's at best a touch crass, at worst ridiculously disingenous/offensive, for a top 1%-er to describe him or herself as "middle class" in a discussion about who's squeezed etc.

[Astolat]

Actuallyaddad a rich person wanting to keep as much of their money as possible rather than it go towards public services or to pay down the deficit is absolutely their prerogative to argue for. But I just want to be clear that that is what this is about. Not that a tax on multimillion pound property is actually going to make things hard or difficult for many / anyone in nappy valley.

I just feel the argument about 'squeezed middle' and hardship is disingenuous and shows a lack of perspective of how well off you are and understanding of what struggling really is.

[supergirl]

Nicely put Astolat.

As much as i would like to keep all my money to myself (dream), i feel very lucky to live in a country where there is a proper tax system, with people at HMRC being really nice and helpful (i had a few questions regarding our nanny when we had one), in a country that have decent roads, relatively clean, with green areas and a decent school and health system.

The mansion tax is unfair because it is based on the value that a house is worth but the owner can not benefit of that value unless he sells if he finds a buyer willing to pay that price.

But anyone calling themselves a squeezed middle while living in this area in a house worth 1million is an hypocrit. If you feel squeeze maybe it is time to re assess your budget: downsize, change areas, take kids off private school, SAHP maybe go back to work (in the long run you ll be better off), change car, etc.