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Homeowners must be taxed on equity in homes to address crisis, MPs told

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    #31
    What I don't get is that companies, many not registered here, get to walk off with £B's in profits and no one seems to think these should be a target?

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      #32
      It's CGT on primary house on sale - presumably relatively low rate ( at start), they will keep stamp duty too in this case

      Comment


        #33
        Originally posted by Martin@AS Financial View Post
        Taken from Mortgage Solutions:

        Stamp Duty should be scrapped and replaced with a tax on equity in people’s homes, MPs have been told.
        The government should introduce a ‘primary property gains tax,’ in order to address the housing crisis and close the gap on wealth inequality, Michael Johnson, research fellow at the Centre for Policy Studies, today told the Treasury Select Committee.

        The committee of MPs, chaired by Nicky Morgan, is investigating household finances and which policies could support people in saving and sustainable debt and credit.

        Mr Johnson told the committee: “We’re going to have to grasp the nettle, and ask ourselves the question about redistribution.

        “There are only two areas to go to – one is pensions and the other is equity in homes.”

        Replace Stamp Duty

        Mr Johnson said: “We ought to scrap Stamp Duty, it’s a barrier to entry, and we are going to have to introduce a primary property gains tax.”

        Mr Johnson said he had bought four-bedroom house in North London 20 years ago, which generated £3m of equity.

        He added: “I believe I should be taxed on [the equity] when I sell it.”

        Mr Johnson also predicted that as first-time buyers take longer to get into ownership and the decline in final salary pensions, more people will rely on the home for income in retirement in the future.

        He said: “Equity release is going to have to play a much bigger role in the provision of retirement and income than it has historically.”

        The ideas raise similar thoughts to those proposed by the London School of Economics (LSE), which suggested Stamp Duty needed to be overhauled along with Council Tax.
        This won't work as intended. If everyone is taxed on their equity when they sell, nobody will be able to afford to buy a subsequent property without saddling themselves in more mortgage debt. The mortgage system will adjust to make it easier for those in their 50's and 60's who have paid off their mortgages to re-mortgage, particularly those who are retired or semi-retired, because anyone with equity is bolloxed.
        If they re-mortgage before they sell, that cancels out some of the equity, so they pay less tax. All you end up doing is moving the problem. We'll end up with an elderly population with huge mortgages cancelling out their equity, just so they can afford to downsize.
        Get this wrong, and we'll see a property crash of Armageddon-like proportions.
        His heart is in the right place - shame we can't say the same about his brain...

        Comment


          #34
          Originally posted by NigelJK View Post
          What I don't get is that companies, many not registered here, get to walk off with £B's in profits and no one seems to think these should be a target?
          But they have legal teams and accounts to fight for their ill gotten gains; much harder targets than the already squeezed, relatively defenseless middle.

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            #35
            Originally posted by mattfx View Post
            But they have legal teams and accounts to fight for their ill gotten gains; much harder targets than the already squeezed, relatively defenseless middle.
            Exactly. The very rich will put everything in offshore trusts, even more so than they do now. Nobody else will be able to afford to move anywhere, either up or down, so the property market will die on its arse. Whoever thought of this is a well-meaning idiot, but an idiot nonetheless...
            His heart is in the right place - shame we can't say the same about his brain...

            Comment


              #36
              Originally posted by AtW View Post
              Looks like another reason to emigrate
              Where to? Plenty of countries have CGT on house sale and wealth taxes.

              Originally posted by Mordac View Post
              This won't work as intended. If everyone is taxed on their equity when they sell, nobody will be able to afford to buy a subsequent property without saddling themselves in more mortgage debt.
              Not really.

              Currently you pay x% of the purchase price of the home you buy as stamp duty. Under the new regime, you'd pay y% of the equity. Depending on x and y, you might be handing less cash over to HMRC. It could discourage paying off the mortgage though. It would make more sense to tax the profit, rather than the equity. Unless you're a friend of bankers of course.
              Down with racism. Long live miscegenation!

              Comment


                #37
                So to bypass this 'bright' idea you just MEW to the max prior to selling so there's no equity in the property to be taxed. As long as the interest on the re-mortgage is less than this new tax you're onto a winner.
                Maybe tomorrow, I'll want to settle down. Until tomorrow, I'll just keep moving on.

                Comment


                  #38
                  Originally posted by NotAllThere View Post
                  Where to? Plenty of countries have CGT on house sale and wealth taxes.

                  Not really.

                  Currently you pay x% of the purchase price of the home you buy as stamp duty. Under the new regime, you'd pay y% of the equity. Depending on x and y, you might be handing less cash over to HMRC. It could discourage paying off the mortgage though. It would make more sense to tax the profit, rather than the equity. Unless you're a friend of bankers of course.
                  That largely depends on the % of the equity that you are required to pay in tax. Whichever way you look at it, upsizing is all but out of the equation, unless prices crash dramatically, in which case you're fooked anyway, and downsizing works well if you can find a mortgage which protects you from the equity tax and you can pay it off from selling.
                  Just build more houses, employing more people to build them, and over time, it might just get a little better. The sledgehammer might just crack a bit more than the intended nut...
                  His heart is in the right place - shame we can't say the same about his brain...

                  Comment


                    #39
                    Originally posted by Hobosapien View Post
                    So to bypass this 'bright' idea you just MEW to the max prior to selling so there's no equity in the property to be taxed. As long as the interest on the re-mortgage is less than this new tax you're onto a winner.
                    If you can. Age pays a large part, once you're over 50, it gets progressively harder to re-mortgage. Try getting a 25 year mortgage after you've paid off your mortgage, and get back to us.
                    His heart is in the right place - shame we can't say the same about his brain...

                    Comment


                      #40
                      Originally posted by Mordac View Post
                      That largely depends on the % of the equity that you are required to pay in tax.
                      Obviously.
                      Whichever way you look at it, upsizing is all but out of the equation...
                      Why? As you say - it depends on the %ages. Effectively the stamp duty is merely defered to the sale, and is based on selling price rather than purchasing.

                      You buy a home for 200K. You sell it for 300K and buy a new home for 600K.
                      • Currently you must find an additional 30K to cover the stamp duty.
                      • New regime, you pay x% of (300K - mortgage). Depending on your mortgage, the equity tax would have to be 10% or more for you to be worse off.


                      You sell the house after 30 years for 1M, and buy a 500K property in the countryside.
                      • Currently, you'll need to find an additional 25K for stamp duty. Total paid: 55K.
                      • New regime, you pay x% of (1M - mortgage). Max total paid x% of 1.3M. Depending on your mortgage, the equity tax would have to be more than about 4.25% for you to be worse off.
                      Down with racism. Long live miscegenation!

                      Comment

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