Put yourself in the shoes of a middle class person for once.
Wealth Tax in the UK
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In the latest episode of the United Hour Podcast, Nik (@Rood) and Imran (@Annihilate Now!) look forward to a new life under Ruben Amorim. What system will we be playing? What players will impress? and how will it all go? We also say goodbye to Ruud Van Nistelrooy and review United's 3-0 win at home against Leicester City.
You're right, it isn't rocket science.
if they're in their early 20s and earning 150k/year, of course they won't have the deposit yet but that deposit is going to come incredibly quickly, far more quickly than most others. One of the juniors on my team earns 50k gross pay, lives in a pretty nice place paying less than 1K rent/ month and is saving up about a grand a month.
If they're much older than early 20s, I assume they haven't suddenly found themselves going from living paycheque to paycheque and have probably been saving a bit on their journey up to that salary.
With a salary of 150k, you'll be getting a mortage of what, 600K? 750k if you're lucky and have a stable job? If you're willing to head out of zone 1/2, you can quite easily buy a flat, with a garden, for £500k, even now. If you want a house house, yeah you'll have to pay more.
But with a take home salary of roughly 90k, unless you've got a large family to support, are living a ridiculous lifestyle or have decided that you have to live in Kensington, you should be seeing your savings account go up pretty rapidly. You certainly shouldn't be 'struggling' to buy something in London after a few years.
Theres a big problem with people being able to enter the housing market but the post I quoted wasnt about that. They were just moaning they hadnt made as much money on their house as their mum did on hers.
Whilst I agree about moving around to drive up wages, there is a point that it isn't going to increase much. I had a hefty period of wage rises in a five/six-year period, but it is far harder now to get any further than that. I would have to move to London, and I never want to live in a massive city, so that isn't an option for me. Besides, the costs will probably eat away most of the increase anyway.
What this doesn't take into account is security. You will be filling a rich person's pocket with rental payments. Unlike mortgage repayments, there is no potential to ever recover that expenditure. Rental payments tend to be no less than mortgage repayments in most areas, so the likelihood of your savings being bigger is not that high. Average rent in the UK is £700 pm and mortgage payments are £750pm. What is the incentive not to pay into a mortgage?
The assumption here is that your wages would increase to such a point that it could make a substantial contribution to replace the rental expense. It also assumes that people will save properly because if they don't, it could become problematic in the future. You would be putting more of the onus of saving on a 'rental' society than a 'homeownership' one because mortgage repayments are almost an enforced saving technique once you take one out. It could have some serious consequences in the future if savings aren't sufficient.
Averages Monthly Wage
Germany's Net Wage - €2,531
UK's Net Wage - €2,229
Is a difference of €302 per month enough to cover the rental outgoings on average? It is not easy to say, but the average rent seems to range between €500 to €600 p/m in Germany. In this case, the additional income from a rental society does not seem to recover the rental cost. Despite having a higher wage you would actually be down on net savings than you would if you opted for a mortgage.
So, at what point do you stop paying rent? On the average rent in the UK, you could spend £84,000 in ten years. £84,000 that you will never see again. Or, you could pay £90,000 into a mortgage (minus interest) and see what £50,000 (complete estimate), but at least you have a chance of getting a hefty some back. I wonder if the long term impact of choosing a rental society has been tested yet. It could go horribly wrong in the future. Whilst unemployment may be higher (I think that is a bit presumptuous looking at those graphs), it could very well be less risky in terms of savings.
I know, I was just pointing out that owning a house, living your life in it and passively making a tonne of money isn’t exactly comparable to actively investing that money for 30 years and then having to come up with more money for somewhere to actually live.
A mortgage of 650k requires a deposit plus tax like stamp duty of around 120k in cash saved If you save 2.5k a month that takes 4 years.
Your post about ridiculous lifestyles and living in Kensigton is silly. Mayyou outght to speak to some people who earn around that much (and dont come from waelthy backgrounds) I think you find it not as plain sailing as you make out. Also as you pointed out the caveat is (after a few years) so it is a struggle you cant do it right away. I woudntl call that extreme wealth especially if you didnt come from a family of stable earners or even home owners.
it is definately wealthy though as I have stated. I grew up in Brixton. The house where I grew up in is now worth 1.3m. Its no where near Kensington. London is expensive not only areas like Kensington.
Half this thread is nerds pretending to understand economics and the other half is people who like to think of themselves as 'just your average guy' trying to explain how earning as much as five of us put together doesn't mean they can spare a dime more.
Exactly. My mother was earning around 34k a year in 94. That was half the cost of the house in the just out side toff part of town. If she really wanted to, she could have saved hard and bout the thing outright in 3 years. Who can do that now? People are even struggling to come up with 5% deposits the cost of living is so high. Ive seen more a than few houses where the rent is as much, if not more than a mortgage would cost.
Purchases a dwelling is not the same as the world of stock and trade. Housing is basic stuff. You buy a flat, you save a little, you get a mortgage and you move on up. But the cost of living goes up while the wage doesnt. At least not inline anyway.
If I had sunk my money into S&P I might have 250k now, but I would have been homeless for the past 7 years. So its not really a choice, is it? Having wealth and having money arent the same thing.
As for house prices, how do you think they got that high? Demand. The demand for houses went up and the population increased and the available dwellings went down. And since it was the "boomers" that bought all the council houses that were now not available for the generations that followed because the tories didnt build any to replace them, I think they had a pretty good idea about the state of the housing market. But we arent talking about houses as an investment, we are talking about places to live. As I said above the cost of rent is inline or above the cost of a mortgage outside of the limited rentals of the various housing associations and councils. If youre paying that much to rent, you might as well pay that much to buy. At least youll have something to show for it at the end. But a lot of people cant even do that. Stuck paying the mortgage payments of various landlords instead of "investing" in their own home.
and yet there are potentially 700,000 empty homes in the uk.
there isn't a shortage.
I speak to graduates who complain they can’t buy a flat in Clapham... fecking live further out and commute.
With every property You have to make sacrifices, you can’t have a north facing garden, parking, tree lined streets, 3 beds etc etc.
The market is artificially propped up by help to buy.
But are you single? Because if youre into balding over weight men with a stomach acid problem that makes them burp loudly a lot, Im your guy
Hahahah married with second kid on the way.But are you single? Because if youre into balding over weight men with a stomach acid problem that makes them burp loudly a lot, Im your guy
This is what I mean though. How much is this house? Especially if we're talking about a starter property. A salary of 150k is about 90k take home or 7k take home per month. What are these people spending 5.5k on per month? Are we talking people with big families or single young Londoners? Seeing as most mortgages can be achieved with a 10% deposit, they're buying a 1.2 million house? For a starter property?
I do know and work with people who earn that much (and I live in London). Probably I'm in the wrong field but they're mostly medical consultants, who are in their 40s onwards, with kids etc. They're not exactly living in absolute luxury but they certainly aren't 'struggling' to buy property in London.
Brixton is in zone 2, really quite bustling, massively gentrified and being on the victoria line means its ridiculously well connected. You're not going to find good value in Brixton, Clapham, Angel, Aldgate, Fulham, Greenwich or Ealing.
The areas are far more boring but you'll find much better value in Woolwich, Tottenham, Harlsden, Colindale, Wembley, Wood Green etc etc. Not saying I'd live in those areas and I wish London was far more affordable but if you're earning 150k gross, you should definitely be able to afford a place (house even) in these kinds of places within a few years.
https://commonslibrary.parliament.uk/research-briefings/sn03012/
268k homes classed as long term empty by the government, so I don’t know where a figure of 700k comes from. There‘s a clear issue of shortage whether you class it as building or availability, more so during the last 12 months. Assuming that housing shortages don’t exist and it’s driven by people not making sacrifices is a narrow view to take on the issue.
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People with families and dependants like parents etc which is usually the case when you don’t come from wealth. You may not know any of them but I do. Its not that usual either.
Of course its much easier for them but we were discussing EXTREME wealth. I wouldn't out them in that category personally. Wealthy yes most wealth comes from assets pass down through generations not your salary by the way.
In terms of the field of work I speaking more of tech and fintech
Regarding Brixton yes is massively gentrified now. It wasnt always it was literally a community for the windrush generation who have mainly been pushed out due to gentrification. And their children of which I am one pushed out too.
I would class someone who earns a third of my salary but whos family have been in that earning bracket for 3/4 generations as more wealthy than I am at the moment
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Their shopfloor workers are going to get jackshit. All the money is going to go to the top.
I know what the official figures say, but it’s not a true reflection, that’s why I said up to.
you need to look at how an empty property is captured.
if the owner is paying council tax, and hasn’t declared it empty - then it won’t be counted.
long gone are the days when most councils offered a discount on empty properties, so the owners pay the council tax, and the fact it’s empty is not captured.
whatever the exact number is, we don’t know, but it’s a hell of a lot higher than the official numbers - and ha big spoken to a number of experts, that’s where the figure of up to 700k comes from.
we don't need to build so many houses, bringing properties back into use, commercial conversions and sensible development of existing property would go a long way to solving the issue.
help to buy and subsiding the big house builders for more than a decade is not the answer.
The shareholders got a fat wedge through a hiked dividend.
A wealth tax based on property price sounds like electoral suicide to me.
Couldnt agree more to be honest
So a person living in a £1 million house and on 50k a year isn't wealthy? Your living on a different planet if you think that's the case, most people could only dream of that.
The empty home scenario isn't one that will be resolved quickly though so we will still require houses to be built. Proposed numbers of 340,000 per year is needed which based on the current volumes being built isn't enough. The wider challenge is the type of housing being built. LSE had a good article on this topic & they deemed the 'no shortage' narrative a myth, or in simple terms, fake news.
You did that, you have a house. Your complaint seems to be that it hasn't gone up as much as you'd hoped. A house is a place to live, it's not supposed to be an investment too. It's only because of a freak decade that everybody now expects to double their money on their property.
A much bigger problem is how difficult it is to get a house for first time buyers, with stamp duty, mortgage access and job security all big issues. However on the flip side of that interest rates are almost zero.
Government policy and red tape has all but killed off the mid tier house building sector that used to account for a sizeable chunk of new builds and a big chunk of renovations and conversions. In many cases it's cheaper and easier to knock a place down and build from scratch, or better yet find an empty site and develop. Then you're up against the big developers in an ever losing battle.
Spot on, to be fair.There was a similar situation in California and the response was Prop 13 in 1978.
Aren't you an outlier on your 6k a year?
A 500k threshold would also target a 50-year old with 100k in the bank living in a 400k property, wouldn't it? I don't know about the UK but that would target a lot of people here in Belgium that I'd definitely consider as just middle class and not wealthy. Most people who built houses in city centres in the 80s or 90s are now living in a 400-600k property but those are not the peope/families that a proper wealth tax should be targeting imo, regardless of what you consider "wealthy". If you're of the opinion that there should be an additional tax for everyone living comfortably who can afford it, then fair enough but again that's not a proper wealth tax imo.
This is already happening where I live, Im in Hereford, and since the massive white elephant of a new shopping district has popped up, high town is dying on its arse. The empty units are rapidly becoming residential, although at ridiculously high prices rather than as affordable housing.
£100k in the bank and living in a £400k house is wealthy. That is beyond most people in the UK.
In that specific hypothetical they’d be at the (suggested) threshold and so would have no liability, but for the sake of argument let’s bump their home up £50k, are you really suggesting that someone living in a mortgage free £450k house with £100k in the bank is being treated unfairly by being asked to pay £500 per year for 5 years?
Compare that against the enormously regressive alternatives like increasing each of the personal tax bands by a few points and/or increasing VAT which will have a much heavier impact on lower earners.
And before anyone brings up CGT again, that won’t touch the sides so it’s not a viable answer even though it’ll probably go up anyway for the political win that comes from most people not knowing how little it brings in and seeing it as “sticking it to the rich”.
100k in a pension fund? That isn't outrageous for most of the middle class.
I could accept some higher taxes but I don't see how a wealth tax is workable. Both from a practical point of view and the fact it's very un-tory like. What happens to older people living in big houses that have limited liquid assets? Boot them out?
I can’t imagine this wealth tax will take pensions into account. “In the bank” is quite different and suggests liquidity.
Yup, a number of people that obviously view themselves as average, lower-middle class people, seemingly oblivious to what being on something like 150k a year means in the grand scheme of things. All of their friends probably earning similar money, and they don't feel 'rich', and work in industries where a lot of people make even more than them, so it's easier to feel like you aren't deserving of any label. This whole 'London' notion is ridiculous as well, you can live 50 mins/1 hr outside London while working there, nobody is forcing anyone to buy a home smack bang in the middle of London, 20 mins from work. Dublin house prices are pretty similar to London outside of the ludicrous 0.0001% top end, and I certainly wouldn't say I'm not wealthy, just because I couldn't afford one of them(and I earn nothing close to some of the figures being mentioned in here).
I just want to point out that this is not correct. There seems to be this desire to paint Britain as a country full of poor people, but the stats just don't back that up. We live in one of the most wealthy countries on earth.
If you're interested in average wealth by age:
Now, you might say "yeah, but the mean is skewed high by the super-rich". Let's look at the median:
As you can see, 64% in the '55 to 64' bracket have wealth above £300k, and 53% above £500k.
To go back to your original point, this level of wealth is not beyond "most people" in the UK, it is in fact the norm once you reach your fifties.
We're probably somewhat biased on this forum as I imagine we skew towards to younger age groups, where we're obviously in the wealth accumulation stage of our life. But it's good to have a look at the data to orient ourselves as we'll probably feel differently when we reach our later years.
None of this is to say a wealth tax is a bad idea, rather to provide some context to the 'what is wealthy?' question.
All stats sourced from the official ONS data: https://www.ons.gov.uk/peoplepopula...otalwealthingreatbritain/april2016tomarch2018
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Anyone keeping 100k in a bank deserves to get taxed more.
The proposal is to include all forms of wealth, including pensions. It kind of has to as otherwise it would target the poorest people, who don't hold their wealth in pensions. Wealthier households pour a big chunk of their cash into pensions.
No not necessarily unfairly treated no, I'm just trying to point out that to me, a 500k threshold doesn't equal a wealth tax that would "stick it to the rich" either. Most really wealthy people would also not have that on their personal accounts but in trusts, companies and the likes. And they'd be able to shift whatever wealth they have in personal name before it would affect them, so it would rather impact the people living in that mortgage free house with a bit of savings built up than the extremely rich imo.
The government would need to map everything (would that work privacy wise?) to be able to make this work - is that feasible and cost efficient? Can't speak for the UK but our tax system here is already so absurdly complicated that we really shouldn't be adding another layer, yet should be looking at a complete rebranding in order to get to a simple, fair and easily collectable tax system. Adding another tax (and let's not forget that there are already quite a few taxes on assets anyway) wouldn't solve a thing.
Not sure if € and £ makes that big of a difference right now, and by no means I'm saying that you're not "rich" if you have that, but that's not outrageously wealthy either. My mum is a college teacher living in a €400k home making probably around €40k a year - she could easily afford £500 per year for 5 years but that's not the kind of people I have in mind when I hear you talking about a wealth tax at all, that's all I'm trying to say.
He said in the bank not in a pension fund. That's quite different.
Sorry but if you think that most people in the UK would be able to have £100k in cash savings then I believe you are wrong.
All I can do is point to the data. The mean non-property assets for a household in the 55-64 age group is £603,400. This is the age where private pensions are accessible and become liquid.