Well, there was lots in the media over the weekend regarding the "Mansion Tax" which the Lib Dems have been proposing and it now looks like Labour will support it. So what are the possible implications?
I am not a politically active person and not much makes me get on my high horse but really, talk about one of the most unfair taxes.
The proposal is now potentially beyond just people that live in a £2m house but would cover any landlord's overall assets. At the moment it is unclear whether the tax is on £2m worth of property or £2m equity in the property - there is quite a difference, and if it just goes on the value there will be numerous people in the South East and property investors fearing the worse. I remember the poll tax riots because it was deemed unfair as it wasn't based on income, not an exact comparasion, I admit but landlords are seen as cash rich and fair game to the media and massess despite some of them working tirelssly to provide good housing, service to tenants and making their property business work. 17% of the country wouldn't be housed without them remember!
So, someone has worked hard, built their portfolio up successfully and been prudent with their money. They have used property to build up their pension, like the government keep telling us to do. They have paid Stamp duty when purchasing the property, they will have paid tax on their income from renting out the portolio, they will pay capital gains tax if they sell and they will pay inheritance tax when they pass away. But, that's not enough! Yet the government is desperate for people to arrange their own pensions and offer tax relief on deposits on those willing to gamble on the FTSE.
It is also worth mentioning that from April, the Council Tax relief on vacant unfurnsihed properties has been reduced from 6 months to 1 month - thus numerous landlords will have more contributions to make inbetween tenancies.
Here's a story thanks to Paul Fenton on a property forum, propertytribes....
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An economics teacher at a local school made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that, if socialism was fully adopted, no one would be poor and no one would be rich, and all would be equal.
The teacher then said, "OK, we will have an experiment in this class". All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A.... (substituting grades for pounds - something closer to home and more readily understood by all).
After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.
The second test average was a D! No one was happy.
When the 3rd test rolled around, the average was an F.
As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.
To their great surprise, ALL FAILED and the teacher told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, and gives to those who do nothing, no-one will try or want to succeed. "
The point here is that, this tax is aimed at spreading wealth, but will only seriously affect aspirations of many hard working people, and can only lead to bringing people's aspirations down to the lowest denominator.
What will most landlords do? Well, until we know more detail it is hard to tell but don't be surprised if some sell stock to avoid the tax, or decide not to extend their portfolio, thus further reducing stock for the Private Rental Sector, thus pushing rents up higher - so who ends up paying? That's right, those that can't afford a house, generation rent / wannabe first time buyers, - so much for wealth spreading.
I promise not to bleat about political things in the future and try to make it more local, but this has to be one of the worst thought through policies.
Comments welcome!
