Britain's Tax Con

Katie59

I don’t think an annual property/wealth tax is practical although valuing property is not difficult it’s done routinely with probate and when property is sold.
It’s much easier to tax on sale or death when the cash is actually available, older homeowners living in a valuable property just don’t have the cash to pay an annual tax.

If an Property Tax was brought in wouldn't it be possible to allow people over a certain age to have their property tax held in abeyance until the house was sold Katie?

If you raised the age this scheme started at by a year each year, that cohort would gradually disappear. Those younger at the start would know they needed to add this into their calculations when deciding whether they can afford to stay - as many already have to when incomes are lower.

A proportional property tax would not raise revenue, but it would even the burden between poor and rich households.

But this is assuming that richer people live in the higher value properties, which is not necessarily the case. A property could have been bought 20 or 30 years ago when it was affordable by the purchasers but though the value of their property may have risen, their income may not have risen in the same proportion. So you'd be asking a not particularly wealthy house owner to pay more that they wouldn't be able to afford. What happens then? Do people have to move to a property of lesser value so that they can afford the property tax? Is that a satisfactory way of proceeding?

However, I still think that the initial problem would be the revaluation exercise needed to establish the value of the property. Then what happens if house prices fall and the property is no longer has the value on which the tax is based?

I think there are too many difficulties attached to taxing property on its 'value'. I have no idea how it works in the US.

OTOH, raising the rate of corporation tax is straightforward. Does something like that even get debated in Parliament? As far as I recall the Chancellor announces the new rate and it's implemented, no debate at all.

Chancellors can play with tax allowances, vary rates of tax, impose tax on commodities and wealth transfers, etc. with little problem; taxing known monetary wealth is far easier than taxing property value.

I’m no socialist but I do think that the wealth accumulated by house price inflation should be taxed properly, the amount that can be transferred untaxed is much too high. The disparity in wealth that can be accumulated between home owners and renters has become too high, that gives the next generation too many advantages as well

Whatever changes Reeves makes will be tapered in, there
probably won’t be any commitment to any particular changes because that could deter too many home owners voting Labour.

It does sound as if a re-evaluation is necessary if you are going to tax property on an annual basis then Maisie. That would bring us back to Katie's thinking about property being best taxed on sale.

If you need an "Incomes Tax" to provide for council spending that's a whole other ball game but perhaps that's where this goes?

I’m no socialist but I do think that the wealth accumulated by house price inflation should be taxed properly, the amount that can be transferred untaxed is much too high.

I'm assuming that you would propose the tax to be incurred at the point of sale? Otherwise you're stuck with the valuation exercise problem again.

Sorry if I crossed Katie. I took too long posting (lunch called ).

People keep mentioning downsizing as a way of producing profit on property to enable cash then to be distributed to family etc. I would love someone to find me a 2 bed detached bungalow in a decent area with good transport links to community services that I can afford. I live in a 4 bed detached in small sought after area and yet what my house would sell for woukd no way cover what I am looking for. People banging on about diwnsizing should look at the housing market. There does not seem to be any legislation to force builders to include affordable housing suitable for downsizing, other than apartments. I won't be handing any lump sums to family in my lifetime to avoid IHT.

I am obviously totally out of step with the majority on here, I am against taxing one’s principal home in any shape or form.

Buying a secondary home incurs a higher rate of stamp duty (tax) than you would pay on your principal home. Therefore landlords have already paid an extra tax. I do agree with taxing landlords on any profit after expenses on their rentals.

I would bring in a fourth tax band for the billionaires of 55-60%

I think that paying NIC on rental and investment income would be a good idea. There are many people whose only income is from those sources and yet they benefit from the NIC paid by everyone else.

Dinahmo

I think that paying NIC on rental and investment income would be a good idea. There are many people whose only income is from those sources and yet they benefit from the NIC paid by everyone else.

NIC is no longer ringfenced for health/pensions it’s just an extra form of tax which employers and employees are obliged to pay.

How about doing away with it all together by adding it onto general taxation with employers paying a percentage to HMRC for each employee.

GG13 - There are few allowances for LLs to claim now - just £1k a year. I bought a single property years ago to supplement my pension and pay tax on the total rental income. When my current mortgage deal comes to an end, I’m dreading that the payment will rise to where I’m getting so little, that it’s not worth the hassle. However, I’ve now got a wonderful tenant, so I’ll just have to bite the bullet for a few years longer.

I was interested in the comments about council tax, particularly as I was born in Burnley which apparently has the highest % council tax relative to property values. I don't live there now, but on the outskirts of London where I pay a much lower %. However if his suggestion was implemented, councils in poor areas would not have enough revenue to provide even the most basic services so council tax would have to be centralised and all services paid for by central government, taking control out of the hands of locally elected councils. Even before the council tax was invented and before the poll tax, we paid based on rateable value but the multiplier was set by the local council. If I had to pay a straight % of my home's value I would have to downsize or move back to Burnley to be able to afford to pay!

I am intending to downsize and move back North to enable myself to be mortgage free, but I don't expect to pay much less council tax as I will still require the same services that I require here in the South, which will cost a similar amount to provide.

Georgesgran

GG13 - There are few allowances for LLs to claim now - just £1k a year. I bought a single property years ago to supplement my pension and pay tax on the total rental income. When my current mortgage deal comes to an end, I’m dreading that the payment will rise to where I’m getting so little, that it’s not worth the hassle. However, I’ve now got a wonderful tenant, so I’ll just have to bite the bullet for a few years longer.

Where do you get the figure of £1k per annum from? I've just looked on a tax return and cannot find that restriction. You still get a tax credit for loan interest, albeit at the basic rate.

Dinahmo

Georgesgran

GG13 - There are few allowances for LLs to claim now - just £1k a year. I bought a single property years ago to supplement my pension and pay tax on the total rental income. When my current mortgage deal comes to an end, I’m dreading that the payment will rise to where I’m getting so little, that it’s not worth the hassle. However, I’ve now got a wonderful tenant, so I’ll just have to bite the bullet for a few years longer.

Where do you get the figure of £1k per annum from? I've just looked on a tax return and cannot find that restriction. You still get a tax credit for loan interest, albeit at the basic rate.

Indeed.

I believe we have expenses (prior to any small profit) of interest, maintenance (not improvements), water, council tax, gas, electricity, insurance, mileage rate (for attending to property), gardener, letting fees, solicitor, accountant.

GrannyGravy13

Dinahmo

I think that paying NIC on rental and investment income would be a good idea. There are many people whose only income is from those sources and yet they benefit from the NIC paid by everyone else.

NIC is no longer ringfenced for health/pensions it’s just an extra form of tax which employers and employees are obliged to pay.

How about doing away with it all together by adding it onto general taxation with employers paying a percentage to HMRC for each employee.

It would certainly help to have fewer taxes. Though if a new government could sort out tax for social insurance, health and care it would certainly be off to a flying start.

Norah you're exactly right which is why I was asking where the figure of £1000 came from.

MaizieD

^I’m no socialist but I do think that the wealth accumulated by house price inflation should be taxed properly, the amount that can be transferred untaxed is much too high.^

I'm assuming that you would propose the tax to be incurred at the point of sale? Otherwise you're stuck with the valuation exercise problem again.

Currently the tax is on purchase - Stamp Duty, a tax on sale or probate, you would have a value, if the owner had not paid off the mortgage tax the equity.

Many owners have paid the mortgage off before they are 60 and retire, on their pension and then have 20 yrs house price inflation all tax free without having to work at all.

I only claim the £1K allowance, as the tenant pays all those bills. I pay the building insurance and the gas service/LL Cert and any repairs the tenant needs. Claiming tax relief on the mortgage payment from the income was surely stopped a few years ago?
I haven’t done my return for 22/23 yet, but that £1K was there to claim in earlier years.
I do my own return, so perhaps I’ve seriously missed out.

Katie59

MaizieD

I’m no socialist but I do think that the wealth accumulated by house price inflation should be taxed properly, the amount that can be transferred untaxed is much too high.

I'm assuming that you would propose the tax to be incurred at the point of sale? Otherwise you're stuck with the valuation exercise problem again.

Currently the tax is on purchase - Stamp Duty, a tax on sale or probate, you would have a value, if the owner had not paid off the mortgage tax the equity.

Many owners have paid the mortgage off before they are 60 and retire, on their pension and then have 20 yrs house price inflation all tax free without having to work at all.

Many older house owners are reliant on their homes increasing in value, it’s needed to pay for their care if they go need to go into a home or buy an assisted living apartment.

There is nothing anyone can say that will make me think that taxing your principal home is a credible idea, even if it’s a tax on the difference between purchase price and selling price. In my opinion it would be political suicide for any party that had it in its manifesto, and wouldn’t stand a cat in hells chance of getting through the H of L’s

GrannyGravy13

Katie59

MaizieD

I’m no socialist but I do think that the wealth accumulated by house price inflation should be taxed properly, the amount that can be transferred untaxed is much too high.

I'm assuming that you would propose the tax to be incurred at the point of sale? Otherwise you're stuck with the valuation exercise problem again.

Currently the tax is on purchase - Stamp Duty, a tax on sale or probate, you would have a value, if the owner had not paid off the mortgage tax the equity.

Many owners have paid the mortgage off before they are 60 and retire, on their pension and then have 20 yrs house price inflation all tax free without having to work at all.

Many older house owners are reliant on their homes increasing in value, it’s needed to pay for their care if they go need to go into a home or buy an assisted living apartment.

There is nothing anyone can say that will make me think that taxing your principal home is a credible idea, even if it’s a tax on the difference between purchase price and selling price. In my opinion it would be political suicide for any party that had it in its manifesto, and wouldn’t stand a cat in hells chance of getting through the H of L’s

I agree with GrannyGravy13 on this. People also arrive at owning their own home through lots of different routes, for example the frugal consistently overpay their mortgage so they are debt free younger, I’m a widow and my mortgage was paid off when my husband died, I’ve got a family member who’s a single parent and has deliberately stayed in a small house so she can save and pay her mortgage off sooner.
I fail to see what the incentive would be for people to own their own homes, or to move up or down the housing market as we need them to do to stop the sale of houses drying up if their assets were taxed in that way.

I didn’t expect that home owners on Gransnet to agree with taxing homes more , we do need more tax income and there is a massive amount of wealth locked up in homes that goes untaxed.

Katie59

I didn’t expect that home owners on Gransnet to agree with taxing homes more , we do need more tax income and there is a massive amount of wealth locked up in homes that goes untaxed.

It’s not a specifically Gransnet issue though Katie59, over 60% of people in the UK are home owners. It’s actually more of an issue for younger people in reality, because many will be unable to afford to go up the housing ladder if such a tax was introduced. I can’t see it happening, I think it’s more likely that stamp duty will be increased - the fact that it’s already higher in Wales than it is in England is probably a clue as to what Labour will do.

The problem with taxing house profits is, if you sell to move for whatever reason, downsizing, job relocation, upsizing due to more children etc, you still have to buy at the market rate. Means that when prices go up nobody could afford to move as they'd have to borrow ever more money to cover the tax or buy cheaper and cheaper properties. Also SDLT is paid on purchases, effectively, for many, a tax on debt as they're buying with a mortgage! Need to solve the housing unaffordability crisis before you tax any gains on a main home! Second homes are already taxed on sale.

Georgesgran

I only claim the £1K allowance, as the tenant pays all those bills. I pay the building insurance and the gas service/LL Cert and any repairs the tenant needs. Claiming tax relief on the mortgage payment from the income was surely stopped a few years ago?
I haven’t done my return for 22/23 yet, but that £1K was there to claim in earlier years.
I do my own return, so perhaps I’ve seriously missed out.

Not completely. If you look at the property pages - expenses - box 44 - you enter the interest charged. The relief is available as relief for finance costs at 20%. You calculate your overall tax liability and then deduct the 20% from the total tax due which will give you the amount hat you have to pay.

This method is to ensure that people don't get tax relief on their loan interest at the higher rates.

I wasn't aware of that £1000 allowance so looked it up. You are not supposed to claim any expenses if you claim the property income allowance.

You can correct your 2022 return by the end of this October if you sent a paper return or 31 January 2024 if you filed your tax return on line.

You can also claim a refund up to 4 years after the tax year it relates to. ie 2019 by 31 October if you filed a paper return or 31 January if filed on line.

Here's instructions from HMRC website:

Write to HMRC

You must write to HMRC if you’ve missed the deadline to make changes or you need to make a change to another tax year.

You’ll also need to write HMRC a letter to:

claim overpayment relief
report income you did not include in your tax return

You can claim a refund up to 4 years after the end of the tax year it relates to.
What to include

You must include:

the tax year you’re correcting
why you think you’ve paid too much or little tax
how much you think you’ve over or underpaid
your signature (no one else can sign on your behalf)

If you’re making a claim, also include in your letter:

that you’re making a claim for overpayment relief
proof that you’d paid tax through Self Assessment for the relevant period
how you want to be repaid
that you have not previously tried to claim back this refund
a signed declaration saying that the details you’ve given are correct and complete to the best of your knowledge

Good Luck

Dinahmo

Norah you're exactly right which is why I was asking where the figure of £1000 came from.

Where do these daft notions come from?