How to avoid mansion tax by "rolling it up into my estate"?

littlerock

I live alone in London in our family house of 35 years which was worth £32k when we bought it and is now apparently worth £1.25m and rising. (It is a 4 bedroom semi in outer London).

I am retired and have a couple of modest pensions, total £16,000 and a bit of parttime income but that is all. I am asset rich and cash poor. If local house prices continue to rise and I stay in good health, I can see my home falling into the catchment "zone" for the mansion tax.

So I was intrigued by Clegg's comment that grannies like me will not have to pay it but can roll it up into our estate. Can someone explain to me how this will work?

James_B.

Presumably it will be levied as part of inheritance tax, or as stamp duty if it's sold.

[Deleted User]

Apparently, the threshold for the mansion tax will stay in line with property prices; so houses shouldn't creep into a tax bracket too easily

dunstonh

Both Labour and the Liberals have said it could be paid on death. Neither have given detail of the mechanisms that would need to be put in place to facilitate that.

There are many unknowns still. For example, if you dont pay your tax bill in the period demanded, then you are charged interest. So, would those not paying it but rolling it up until they die also have to pay interest on it.
Will it be a charge on the property made each year it is not paid.
Will it be collected as a brand new tax (so lots of costs that go with creating that) or will it be built into some existing method.
What if you have 20 or 30 year olds that cant afford it. Are we really going to allow 50-60-70-80 years of non tax payment rolled against the property value?

kidmugsy

ringo_24601 wrote: »

Apparently, the threshold for the mansion tax will stay in line with property prices; so houses shouldn't creep into a tax bracket too easily

Oh you are a tease.

kidmugsy

I'm not keen on wealth taxes, but if we must have one it's best not to have one as stupid as the Mansion Tax. So that means we'll probably get it, then.

TheTracker

kidmugsy wrote: »

I'm not keen on wealth taxes, but if we must have one it's best not to have one as stupid as the Mansion Tax. So that means we'll probably get it, then.

Is the mansion tax not simply effectively a new council tax band? Forgive my naivety. We're I PmTracker I'd institute a council tax either based on current value or square footage. I've lived in some very strangely taxed properties based on where they were in 1990. I'd also make sure owners paid the tax, not residents. Can't see it ever happening here though. I wouldn't mind if it was a per person tax but that suggestion didn't go so well last time did it!

[Deleted User]

kidmugsy wrote: »

Oh you are a tease.

I still think anyone sensible will convert their 'mansion' into two or more properties under the threshold. If you are married, one would own one, the other would own another.. no one would pay the Labour tax

Link to comment about threshold rising with property values: http://www.theguardian.com/politics/2014/oct/20/ed-balls-reassure-london-homeowners-mansion-tax

kangoora

Asset rich and cash poor, have you ever considered moving?

£350,000 where I live in North Yorkshire will buy a 4 bed detached 'executive' house, double garage, yorkshire stone exterior etc. £1m will buy a 5/6 bedroomed place in several acres of land. This is in a nice market town on the edge of the Yokrkshire Dales.

Possibly there are family or other reasons why you wouldn't want to move but we've had a few retired couples fron London/Home Counties sell up and come here to retire even with no other relatives in the area, some in my street.

Admittedly, there isn't much work around here and the bus service is pretty bad but £900k buys a lot of taxi fares

On the other benefit side, the worst crime recorded tends to be an increase in sheep rustling and I haven't bothered locking my back door or garage for about 10 years now unless away all day or overnight, then I lock the back door - garage hasn't been able to be locked since I bought the house

dunstonh

Is the mansion tax not simply effectively a new council tax band?

If it had been the addition of new bands then that would actually be more sensible and fair. However, it is a brand new tax in addition to the council tax and takes no account of local pricing issues. This is why a 2 bedroom terrace in London can be caught in the mansion tax despite being nothing like a mansion. Whilst a 6 bedroom detached outside of London is not caught in it.

We're I PmTracker I'd institute a council tax either based on current value or square footage.

Funnily enough, the poll tax was probably the fairest method and looked what happened with that.

I still think anyone sensible will convert their 'mansion' into two or more properties under the threshold.

How will that work with people living in 2 or 3 bedroom terraced houses in London?

I do wonder how ownership is going to be got round. Tenants in common with a 50% share would mean the individual only owns half the house.

Possibly there are family or other reasons why you wouldn't want to move but we've had a few retired couples fron London/Home Counties sell up and come here to retire even with no other relatives in the area, some in my street.

1 - why should they move when they have spent their life there?
2 - what about those who work in London and dont fancy a 4 hour commute each way?

The mansion tax is a typical Labour tax. A tax of envy that picks on the south but plays well in the north.

kidmugsy

dunstonh wrote: »

I do wonder how ownership is going to be got round. Tenants in common with a 50% share would mean the individual only owns half the house.

Good point; I understand that up to four people can own property in common (in England).

Whatever starts at £2M will work its way down to £1M and then £0.5M, either by house price inflation ("fiscal drag") or just by explicit policy.

Anyway, I'll keep my eyes open for adverts along the lines of "pair of flats for sale".


One other point: will the £2M be after subtraction of any outstanding mortgage loan? Because if so .....