Property Windfall Tax?

[Casual Observer]

Heres' an interesting thread from another forum.

http://boards.thisismoney.co.uk/tim/thread...0&message=88542

What do you think?

[bazzzzzzz]

I think it is an untapped scource of revenue polticians are eyeing greedily, and some kind of tax is inevitable in the near future. Hoping it's not retrospective. One way of avoiding unpopular council tax increases. I've read recently of windfall taxes being considered for the oil and insurance industries-(sorry, no links). Windfall taxes: the new short term fix for budget deficeits?

[Casual Observer]

I think it is an untapped scource of revenue polticians are eyeing greedily, and some kind of tax is inevitable in the near future. Hoping it's not retrospective. One way of avoiding unpopular council tax increases. I've read recently of windfall taxes being considered for the oil and insurance industries-(sorry, no links). Windfall taxes: the new short term fix for budget deficeits?

Don't foget the windfall tax NULAB applied to the power industry in 1997/8 http://www.bbc.co.uk/politics97/budget97/live/windfall.shtml

Edited October 5, 2005 by Casual Observer

[zorn]

I think it is an untapped scource of revenue polticians are eyeing greedily, and some kind of tax is inevitable in the near future. Hoping it's not retrospective. One way of avoiding unpopular council tax increases. I've read recently of windfall taxes being considered for the oil and insurance industries-(sorry, no links). Windfall taxes: the new short term fix for budget deficeits?

It's almost impossible to not make it retrospective. If it applies from today onwards, then they have to value every property in the country, and not just in bands as for council tax but to the nearest pound. And the only real way to value a property is to sell it in the open market. He can't apply it to properties after the next time they're sold, partly because the revenue would build up too slowly but mostly because everyone would just sit tight in their current tax-free properties rather than buying one that would be subject to tax, and the market would lock up for years. So there's no real option left other than to tax on the increase in value since the last open market transaction, no matter how long ago that was, perhaps with some kind of taper relief that would apply to newly purchased properties as well.

[Dilbert]

I'm not a frequent poster but wanted to jot down my thoughts on the implications of this, which should it happen, could be the pin to pop the bubble.

As the article mentions, we've had the Council Tax revaluations mysteriously postponed until next year or so.

Afterall, basing the new bandings on current prices which are way over the top would likely lead to a revolt.

So Gordons wondering how he can raise taxes whilst making the majority of the population happier by not revaluing at todays prices.

"I got it" says Gordon, "we tax those people who sell their houses on the difference between their buying and selling price."

So the following could potentially happen;

1) Prices fall pretty quickly as sellers try to minimise their tax exposure (Reduced sale price = Reduced tax bill).

2) Gordon knows all those FTB's who are priced out will at last be able to buy somewhere to live (with an added bonus that they may vote for him as PM in 3-4 years).

3) Gordon raises a nice wedge of tax.

.... maybe someone should post a link to the article on the expats site ...

D

[Guest muttley]

Everyones definition of a "fair" tax is one that they don't have to pay.

On this basis a windfall tax on property is very unlikely,as it would be placing a huge burden on an awful lot of people.This would be Blair's poll tax.

[backtoparents]

Everyones definition of a "fair" tax is one that they don't have to pay.

On this basis a windfall tax on property is very unlikely,as it would be placing a huge burden on an awful lot of people.This would be Blair's poll tax.

But price increases reflect all that extra value the government has added to the economy through investment in infrastructure, services, etc.

Sounds pretty fair to me - can't have something for nothing, can you?

:angry:

[erd]

Huge rush to sell before the deadline would cause very decent price falls by itself. Would mean the tax wouldn't be needed

[beerhunter]

Heres' an interesting thread from another forum.

http://boards.thisismoney.co.uk/tim/thread...0&message=88542

What do you think?

I don't think a windfall tax on the capital gains when selling a home (as to a second property) would be popular

What I could see happen is a reform of CGT / Stamp Duty for holiday and BTL properties.

For example change the Stamp Duty rates so that

- for a BTL you pay (say) +2% above the current rate

- for a holiday home you pay (say) +5% above the current rate

I make the distinction between BTL and holiday homes... at least BTL is providing (available) housing, where as a holiday home isn't providing housing for a family.

Alternatively BTL and Holiday Homes could be hit harder by CGT.

In the end Brown has to raise money, and those that have "made" money recently have to be the obvious targets

Thinking about it more and the dynamics of a market.

I don't think you want to tax when you sell (CGT)... it just puts people off selling and causes even more of a house price bubble because of a lack of supply.

I think a tax has to apply when you buy... and probably when you own.

So a reform in stamp duty (at the time you buy)... and a new council tax (when you own)... and abolishing of CGT is my guess

[apom]

Don't forget.. mortgage payments are not taxed..

The money that is getting sucked into paying for these mortgages used to be spent in the high street..

Which was taxed..

Gordons Pockets are getting empty..

Best he sinks the country into further debt as well as the people..

Mate.. its our damn country.. would you stop F**king it up....!

[Guest muttley]

Ok,but my point is that a windfall tax on ANYTHING is ok as long as it is not you.

So who would disagree to a windfall tax on

OIL,BANKS,MORTGAGE BROKERS,TOBACCO COMPANIES,SATELITE TV,NEWSPAPERS,PREMIERSHIP FOOTBALL TEAMS (add your own)

However,a tax on HPI,a poll tax or a window tax are considered repugnant to the public at large,and political suicide for the incumbant government.

[Boags]

Heres' an interesting thread from another forum.

http://boards.thisismoney.co.uk/tim/thread...0&message=88542

What do you think?

In Australia, the state of NSW brought in a vendor tax(2.25% of sale value) on top of stamp duty in august 2004 ...it has now been scrapped....after only 1 year..This only applied to sales of BTL/investment properties.

The effect tho' was pronounced, negative impact on prices causing the biggest whinge obviously from the VI

[gone west]

Ok,but my point is that a windfall tax on ANYTHING is ok as long as it is not you.

So who would disagree to a windfall tax on

OIL,BANKS,MORTGAGE BROKERS,TOBACCO COMPANIES,SATELITE TV,NEWSPAPERS,PREMIERSHIP FOOTBALL TEAMS (add your own)

However,a tax on HPI,a poll tax or a window tax are considered repugnant to the public at large,and political suicide for the incumbant government.

Windfall taxes point more to a broken tax system than to anything else.

[smiley]

We just need to apply Capital Gains Tax on first homes.

It already applies to second homes, shares, works of art, fine wine, and just about every other asset you can buy. One of the reasons the house market has got out of whack is the unusual tax treatment - you can avoid Capital Gains Tax.

Other tax perks to homeowners have been phased out - notably Mortgage Interest Tax Relief (MIRAS) in the mid-1990s. Capital Gains Tax should come in now, too.

[erd]

We just need to apply Capital Gains Tax on first homes.

It already applies to second homes, shares, works of art, fine wine, and just about every other asset you can buy. One of the reasons the house market has got out of whack is the unusual tax treatment - you can avoid Capital Gains Tax.

Other tax perks to homeowners have been phased out - notably Mortgage Interest Tax Relief (MIRAS) in the mid-1990s. Capital Gains Tax should come in now, too.

One problem would be making it even harder to move into another property. if you had of bought 5 years ago, you would be facing a large tax bill if you move, big enough to stop you from being able to move.

It also discourages trading down when you retire, why trade down when most of the cash released will just go as tax.

[MarkG]

One problem would be making it even harder to move into another property.

Which would mean that prices would drop until it was easier to move into another property. If people can't move, then current owners can't sell.

The lack of capital gains tax on housing causes massive distortions in the market, and sucks money away from productive investment that would benefit the county as a whole into property speculation which harms the country as a whole. Either everything should suffer capital gains tax, or nothing should (I'd much prefer the latter, but settle for the former).

Interestingly, I was reading yesterday that Bush has made some noises about eliminating the capital gains exemption for housing in America.

Edited October 6, 2005 by MarkG

[Last Hun Standing]

Capital gains tax has plenty of refinements that could be tweaked to acheive the desired outcome (whatever that may be).

From a FTB perspective the aim would be to encourage the building and disposal of properties that have been held without use, such as BTL and holiday home. This is exactly the opposite of what has happened, with the actual current capital gains system encouraging accumualtion and hold.

Homeowners

Homeowners are typically exempted using the current PPP (principal private property) exemption. In summary your main home which you designate by election is free from capital gains tax, allowing you to move without a particularly high transaction charge. This is to ensure labour mobility and leads to increased domestic output. All well and good, but it does nothing about underused homes, grannies living in family houses. The PPP has been used and abused - the best example is that an unmarried couple can designate two properties to be exempt (The only question is do you trust your girlfirend enough to put your 2nd house in her name?).

Companies

For historical purchases (pre 98) and companies there is an older regime called indexation which runs using RPI. I.e. you wouldn't get taxed on the RPI uplift but anything after that was fair game and taxable.

Makes sense really, except in a low inflation environment where individual speculators would have to pay taxes on all their gains. Sensibly clownie arranged for a new regime - taper relief regime. (A progressive socialist government not taxing speculators? Massive tax break, wonder why that would be then, wouldn't be ramping the market surely?)

Speculators

Taper relief. I.e. you pay CGT at a lower rate the longer you have owned the property, and at a variable taper depending on the use of the property. i.e. you get Business asset taper relief (BAT) for a BTL / developers and non business assset taper for others such as holiday homes.

BAT was historically more advantageous for individuals, therefore providing a post disposal reward for the BTL. Hence some individuals would have been claiming that their holiday home is a business etc. The difference between the two taper rate regimes has narrowed in recent years.

Conclusions

In summary we have a system that does not enoucrage people to dispose of underused property. The tax should increase the longer a holiday home is held not decrease... PPP is a sham, that has been serially abused, but is so popluar it would be politicallly impossible to completely remove. IMHO of course.

My final consideration is that a BTL mumptie who can't be bothered to calculate a yield, is unlikely to have done an estimate of the final capital gains tax charge on disposal. This is fortunate as they will be realising capital losses whent the banks foreclose on their dreams......