Housing isn't a source of unearned wealth

[Itchthescratch]

If you bought in the last 20 years.

Houses are now worth the same as they were worth 20 years ago in real terms. We need to get over the idea that every homeowner is sat on a money making asset and therefore is in a preferential position to pay loads of tax on all this non existent unearned wealth. Too many people don't understand how inflation works. £1 in 2006 is worth £1.65 today. House prices need to go up 65% just to be worth the same in real terms.

I agree. I also think that many on here simply
do not understand how expensive construction is in the first place. Everyone talks about those in social housing paying rent but my understanding is that this does not cover cost of build and maintenance so long term costs tax payers.

In fairness primary residence can be sold cgt free although depending on amount is included in IHT. Homeowners should be able to offset mortgage and maintenance payments.

Yes that ship has sailed now. Plenty of other things to invest in though.

Worries for the already privileged. MN at its finest.

This comment is closer to MN "at its finest" TBF.

But house price inflation is much more than general inflation, generally speaking, especially when you compare it with wage growth inflation / stagnation

CGT for landlords is an issue though. Why should they pay tax on selling something that hasn't actually appreciated in value?

I also think it has long term implications for IHT. Proponents always say that the majority of what is taxed is unearned wealth through profit but what if it isn't?

But it hasn't for the last 20 years. At what point do we say that this is the norm?

@Itchthescratch

not for 20 years but those who bought in the 70’s and 80’s it’s a different story. I bought in 1995 and that flat bought for £42k (sold many years ago for £150k) is currently on the market for £800k - 30 years

What tax are you referring to?

I bought a converted barn for 90k in 1999, in 2021 sold for 450k.... don't tell me inflation was 400% + over 22 year.

Bought a house 2 years, its now worth 35k more than i paid for it and i paid top of market, will never realise the profit though as its rented to a very close family member, the only reason i would have ever gone into that sector.

Cash bought property can be profitable, above inflation, its interest rates that devalue.

On CGT, your argument would apply to any asset thats sold, that is why there is an allowance, though this is v small now and remember, expenses are offset against CGT, good record keeping is essential and of course CGT ONLY applies to a property that is not your main residence.

On IHT, the person inheriting gets the assets, that is entirely unearned, so why shouldn't a deduction be made from the estate?

Up to 1m is tax free.

But real terms wage growth over the past 20 years has only been around 15% so house prices have gone up by a lot more than wages, hence why they're unaffordable for so many people.

We just bought a house for £500k, our sellers bought it 20 years ago for £250k. On your figures, 1.65 inflation would give £412.5k so they have made £87.5k.

My late parent brought in London many many years ago. They then sold basically to fund their care home that they resided in for nearly 4 years. If the 'profit' was taxed then he would have been forced to go back to the state to fund his care home.

You buy a house which needs doing up. You spend £150k on doing that. 10 years later you want to move. How on earth is that going to be taxed

Yes, but that doesn't detract from the fact that in real terms the value of the property hasn't increased. So it isn't unearned wealth. The fact that wages are also running behind inflation is a different issue.

Have they made any alterations or updates?

Even if they haven't, it will be an uneven picture regionally but the figures are clear at a national level

I presume they may have done the kitchen/bathroom up 20 years ago, but they need doing again.

No older person would downsize either. The majority of them dont want to move anyway even if the house is far too big for them to manage. They would just stay put.

It would cut the market dead. No one would move. They would just wait until another government came in. Labour are a one term government and Starmer will not be leading them into the next election. Its all a horrible mess.

My view is that it will end up being a hung parliament and there will have to be various deals done. I also dont think Farage wants the top job. He will want a voice but doesnt want to be PM. I would personally want to see a Conservative/Reform offering.

If this becomes law (and I dont think it will!) you would have to keep every receipt ever to show the improvements. We have recently redecorated. This will make our house look more desirable. Does that count to offset against any profit taxed.

Again, this is regional. My parents bought a house in the North in 2000 and have technically lost money in real terms on it. This is before you factor in interest payments, cost ownership etc

My own house has undoubtedly lost value in the last two years whilst their house hasn't.

Yes, I agree that CGT is a wider argument but I think this highlights that profit is only really profit when it outstrips inflation. If my parents had been landlords then they would have actually lost money on their house in relation terms but be liable to a relatively big CGT bill for so called gains. It's a joke!

The IHT debate is a moral argument. Lots of people don't like it because they view it as double taxation, especially because you can't even give the money away before you die without potentially falling foul of the tax. If you've already paid a high level of tax to earn the money, why do you need to pay 40% tax to gift it to someone. A lot of people reconcile this by saying it's all unearned wealth anyway so a case of easy come, easy go. That argument doesn't stack up though if none of the gift is unearned.

Ignoring all the facts of your post for a second. I presume because you dont feel CGT should be paid on these mysterious gains.

Its a tax. We need more tax to fund better services etc. The country is currently bringing in less tax than it pays out in benefits etc.

What do you propose to replace the CGT & IHT with? Someone pointed out earlier that you can inherit upto £1m before you pay CGT. Is that not enough?

I think CGT should only be paid on real gains at the point of sale. This is true for anything. I don't think IHT should exist. I think both of these things would encourage investment and be fair.

I would cut public spending before I raised any other taxes.

What public spending are you prepared to cut to enable people to keep all of their £1m+ inheritance?

Interesting post and of course, I suspect there will be outliers here.

But yes, gone are the days of buying a property in 1980 for £40K and watching it double in value every few years.

But in support of your argument, people often forget how insanely expensive properties are to renovate but also maintain. Even if a property needs no major work, it could easily still cost a few grand a year just to maintain - gutters, leaks, window cleaning, blown circuit board, new boiler, the list goes on.

In real terms?

My house is £1.35million now and in 1996 the house opposite me that is the same size sold for £215,000. Everyone on my road has owned their houses for between 30 and 50 years. So I doubt that’s true for my road…

Ahh right. So you just want to keep your money but screw everyone else.