No tax rises

Yes, you are correct Silverbrooks. My ex was one of those who has made a fortune from B2L since 2008. B2L has been a much safer investment than businesses. Many small new builds are now snapped up by B2L investors before they're even offered on the open market. The money involved is diverted from business enterprise and property prices are out of reach of people on average incomes who don't have inherited wealth. It's a problem for the UK. Nobody can blame people for investing their money safely, but investing in businesses needs to be made more attractive.

David The information I've posted is about households, not business renters. The number of private renting households has doubled in approximately 20 years.

Just to add, you can see when this started.

It was the 2008 crash after which interest rates dropped to historic lows and stayed there for 14 years until late 2022.

www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

Many with existing capital moved it from savings accounts to B2L while others borrowed very cheaply to B2L.

I would like to see strong government measures to curb this market so that FTBs stand a fighting chance of buying somewhere to live.

growstuff

Sorry, forgot the link:

www.gov.uk/government/statistics/chapters-for-english-housing-survey-2022-to-2023-headline-report/chapter-1-profile-of-households-and-dwellings#:~:text=In%202022-23,%20there%20were

If you dig deeper into the stats you will find that within the 20% private renters are a growing number of institutional/business renters (not social renters).

Individual renters are on a hiding to nothing, regulation makes it more difficult, many will already paying top rate tax and then CGT when sold, and agents fees in between
Institutions/business renters have a big advantage, their tax rates are lower, can claim back VAT on repairs and can offset gains in many ways

Sorry, forgot the link:

www.gov.uk/government/statistics/chapters-for-english-housing-survey-2022-to-2023-headline-report/chapter-1-profile-of-households-and-dwellings#:~:text=In%202022-23,%20there%20were

Maizie The owner occupied sector is still the biggest, but the private rental sector has doubled since the early 2000s. About 20% of households live in private rentals, which means they are paying their landlords' mortgages and ending up with nothing.

MaizieD

I get your point, growstuff. I was just writing about owner occupied housing (which surely must make up the greater percentage of domestic dwellings?)

Not only are they pushing up property values, they are diverting investment from businesses.

It could be argued that owning rental properties is a business. I wonder if David considers it as such and would say that this isn’t ‘dead money’ 🤔

But I agree with your view; inflated property prices caused by this plus uncontrolled rents and light taxation of the rental income contribute to the inequality gap.

The issue is that owning property doesn't generate the kind of opportunities for employment which other businesses do. The landlords are rentiers who don't do that much for their money. Not only do they have an income in the current market but their asset is almost guaranteed to increase in value. Investment in property is much safer than investment in more productive businesses. Eventually, the asset is passed on to offspring and a new property owning class is formed, while those who have no hope of inheriting money will continue to rent and end up with nothing. The housing market in the UK is a mess.

I get your point, growstuff. I was just writing about owner occupied housing (which surely must make up the greater percentage of domestic dwellings?)

Not only are they pushing up property values, they are diverting investment from businesses.

It could be argued that owning rental properties is a business. I wonder if David considers it as such and would say that this isn’t ‘dead money’ 🤔

But I agree with your view; inflated property prices caused by this plus uncontrolled rents and light taxation of the rental income contribute to the inequality gap.

I disagree with you Maizie. A significant amount of money in the UK is invested by landlords in residential properties, who then reinvest their money in more property or other "tax-efficient" schemes. Not only are they pushing up property values, they are diverting investment from businesses. They are accumulating wealth without doing much for it and increasing the inequality gap.

PS. I'm not talking about owner-occupied homes.

I doubt very much if 'Mrs Patel at the corner shop' has the sort of wealth that we are concerned with, David. Unless she has a huge chain of them...

I'm intrigued by your contention that money 'invested' in domestic property is 'dead money'.

As far as I can see, most homeowners are spending money all the time into the domestic economy, sustaining all sorts of businesses, both retail and services. Repairs and maintenance, refurbishments. new furniture, new carpets, new kitchens and bathrooms and much other expenditure on domestic property all cost money which goes to the businesses which provide the necessary resources. It circulates in the economy just as money should.

The real 'dead money' is money that is being saved and not spent.

“I wasn't referring to business property, but ordinary residential property, in which billions of pounds are invested in the UK, often by very "ordinary" people. The point is that it doesn't generate money in the same way as money invested in business does. It skews the UK economy and society.”

Domestic property should be subject to more taxation there is far to much invested that is dead money not being used productively. I don’t expect anyone on GN to agree with that, too many vested interests.

Most rich individuals - less than 5% of the population have their wealth tied up in business assets, everyone from Mrs Patel with a corner shop to Lord and Lady Bamford with JCB and Daylesford

“I didn't even mention tax avoidance, so I'm not sure what you're going on about.”

Tax allowances (avoidance) are deliberately set by governments to achieve targets or influence voters, there are many that I would change along the lines that Murphy suggests.

We shall see, but so far this present government does not have a good record of keeping its promises, both pre and post election.

David49

Maisie

I did read the short version of Murphys report and as you said I do agree with most of it there are far too many allowances that are too generous, the government can and I hope will change that.

I am dead against a “Wealth Tax” based year by year on a fixed % of assets

The first one should be the tax allowance at a higher rate for pension contributions. It's totally unfair and is blatant support from the government for higher rate taxpayers. Those who can't even afford pension contributions get nothing.

David49

growstuff

David It is not true in the UK that most wealth is tied up in business assets - not in the form I think you mean, when a business owner produces something tangible.

A significant amount of wealth in the UK is invested in property, which distorts the UK economy in all sorts of ways. I read a report last year that banks were lending more money for property than they were for businesses. Property owners do, of course, set up businesses, but they're not the same as a factory producing widgets.

Property investment provides safer and bigger returns for UK investors, which diverts investment from businesses. It doesn't generate many jobs, which means there are fewer people to pay income tax, etc. A number of economists have written about the dangers of rentier capitalism (not necessarily in the Marxist sense) to society as a whole.

I'm not going to write a whole post about all the pitfalls. What I am saying is that it's a myth to claim all wealth is held by people who do something productive with it, which is why "trickle-down" economics fails.

Business property is taxed by CGT on sale or by sale of companies or company shares rental properties are also taxed each year on income they produce. The government can change any of those rates as it see fit, a wealth tax would be counter productive.
Tax allowances (or avoidance) as you choose to put it are deliberately there to encourage investment in that sector, again they can be changed, as we have seen this year with the 20%IHT on farmland.
It is so easy for high wealth individuals to pay tax in Switzerland or US or Monaco, that I simply don’t believe targeting them is going to increase revenue. Although I do believe that envy is good reason to try.

David You've quoted my post, but I'm not sure you're replying to it.

I wasn't referring to business property, but ordinary residential property, in which billions of pounds are invested in the UK, often by very "ordinary" people. The point is that it doesn't generate money in the same way as money invested in business does. It skews the UK economy and society.

I didn't even mention tax avoidance, so I'm not sure what you're going on about.

As for your reference to envy ... are you sure you weren't replying to some other post?

The problem has been that the Tories have skewed the tax allowances, grants and subsidies to benefit their voters at the expense of working people, it’s been gerimandering on a massive scale.
Several schemes have been shut down prematurely, more will no doubt get axed

I am dead against a “Wealth Tax” based year by year on a fixed % of assets

In which case, we appear to be singing from the same hymn sheet, even if for slightly different reasons David

Perhaps Murphy's report is misnamed. Perhaps it should be 'Tax to prevent excessive accumulation of wealth'?

to return to the topic. I do think that if some (not necessarily all) of the measures advocated by Murphy were adopted it would vastly increase the tax take and keep the pressure off 'ordinary' tax payers who aren't able to avoid tax in any way. It might make them more likely to spend into the economy, too, if the fear of having to pay increased taxes is removed.

I think that fear is very real, reinforced by commentators, such as those the OP cited, reverting to 'Sh'ell have to raise taxes to pay for it' without thinking of other alternatives... Probably without even being aware of other alternatives..

Maisie

I did read the short version of Murphys report and as you said I do agree with most of it there are far too many allowances that are too generous, the government can and I hope will change that.

I am dead against a “Wealth Tax” based year by year on a fixed % of assets

growstuff

David It is not true in the UK that most wealth is tied up in business assets - not in the form I think you mean, when a business owner produces something tangible.

A significant amount of wealth in the UK is invested in property, which distorts the UK economy in all sorts of ways. I read a report last year that banks were lending more money for property than they were for businesses. Property owners do, of course, set up businesses, but they're not the same as a factory producing widgets.

Property investment provides safer and bigger returns for UK investors, which diverts investment from businesses. It doesn't generate many jobs, which means there are fewer people to pay income tax, etc. A number of economists have written about the dangers of rentier capitalism (not necessarily in the Marxist sense) to society as a whole.

I'm not going to write a whole post about all the pitfalls. What I am saying is that it's a myth to claim all wealth is held by people who do something productive with it, which is why "trickle-down" economics fails.

Business property is taxed by CGT on sale or by sale of companies or company shares rental properties are also taxed each year on income they produce. The government can change any of those rates as it see fit, a wealth tax would be counter productive.
Tax allowances (or avoidance) as you choose to put it are deliberately there to encourage investment in that sector, again they can be changed, as we have seen this year with the 20%IHT on farmland.
It is so easy for high wealth individuals to pay tax in Switzerland or US or Monaco, that I simply don’t believe targeting them is going to increase revenue. Although I do believe that envy is good reason to try.

David It is not true in the UK that most wealth is tied up in business assets - not in the form I think you mean, when a business owner produces something tangible.

A significant amount of wealth in the UK is invested in property, which distorts the UK economy in all sorts of ways. I read a report last year that banks were lending more money for property than they were for businesses. Property owners do, of course, set up businesses, but they're not the same as a factory producing widgets.

Property investment provides safer and bigger returns for UK investors, which diverts investment from businesses. It doesn't generate many jobs, which means there are fewer people to pay income tax, etc. A number of economists have written about the dangers of rentier capitalism (not necessarily in the Marxist sense) to society as a whole.

I'm not going to write a whole post about all the pitfalls. What I am saying is that it's a myth to claim all wealth is held by people who do something productive with it, which is why "trickle-down" economics fails.

I don’t believe in taxing wealth because most of it is tied up in business assets which are notoriously difficult to access.

FGS, read the report, David

Murphy would actually more or less agree with you. 'Wealth' as in business assets, or any other sort of asset, is extremely problematic to assess. Tax avoidance strategies are designed to make it so.

Murphy's proposals don't attempt to do this. Which you would know if you read the report.

I don’t believe in taxing wealth because most of it is tied up in business assets which are notoriously difficult to access.
Let’s take Musk as an example his vast wealth is tied to extremely volatile company shares, in addition he is buying and selling and reinvesting. Taking money out of businesses by taxing capital investment is a sure way of reducing their ability to grow, and the 3.5% that has been mentioned is ridiculous because many don’t make 3.5% return on capital.

I don’t think you’ve bothered to read the Taxing Wealth report, either, David.

Tax payers are a pyramid the few at the top have many ways of holding on to wealth, trying to increase tax does not result in the revenue expected, in addition they can move to a lower tax country as well. To increase revenue taxation has to be from the majority of tax payers, there are many direct and indirect ways of doing that.

Last October Reeves committed to not increasing certain taxes, Income Tax, VAT, etc etc, there are many others, not to mention new taxes, I don’t think a wealth tax is desirable, but IHT maybe could be a target and why not a Gift Tax to catch those avoiding IHT so that all capital transfers are taxed.

There are not enough people in the higher tax bands to produce enough tax. If the government wants to raise taxes and get a sufficient income from it, then everyone has got to contribute.

Have you read Murphy's Taxing Wealth report, MOnica?

Income taxes not the only tax and he proposes that there are plenty of sources of 'income' enjoyed particularly by the wealthy which are more lightly taxed than income subject to PAYE which could be drawn into a more progressive system of tax without any difficulty.

MaizieD

I wii, yet again, post the link toRichard Murphy’s ‘Taxing Wealth’ report which is full of easy ways to increase taxation on wealth through equalising taxes and making them more progressive.

He is not in favour of a ‘wealth tax’ as such because of the difficulty of pinning down this’wealth’ which can exist in many places and forms. His suggestions would be simple to implement and tend more to slow the rate of further accumulation of wealth.

taxingwealth.uk/wp-content/uploads/2024/04/Taxing-Wealth-Report-2024-Shorter.pdf

Reeves would have plenty of leeway with suggestions like his, without having to place any tax burden on the struggling and just managing.

It has been rumoured for some time (under different governments) that pension tax relief would be restricted to the basic rate of income tax. The figure I've read before is £8 billion, but I see Richard Murphy reckons it would raise £14.5 billion. Not only would it raise money, but stop an unfair government subsidy to those who can afford to put more aside for a pension. I don't really understand why it hasn't already been restricted.

It doesn’t work out like that though M0nica because proportionately higher income workers would pay more tax. 5% earn over £100k, which is equivalent to 3 workers on average salaries, as an example - obviously equivalent to more average salaries for higher earners.