We should be charging capital gains tax on every final disposal by a person or their spouse or their civil partner at the time that the last of those two ceases to use that property, whether that’s either because they die, on the second death, or because they move into a nursing home or whatever else, or both of them quit the country and move abroad. Whatever the reason, on the last disposal of a property without there being a reinvestment, which if both are dead there couldn’t be, then there should be capital gains tax charged on the whole of the lifetime gain that they’ve made.
Among the most hated taxes is inheritance tax. It’s entirely possible to say that it’s taxing dead folk and so that’s great. Logical and all that. But folks just really hate it.
That’s even with that exemption (totalling £1 million, isn’t it?) on the family home. Spud’s suggesting that the family home pay full CGT. Which he seems to think should be at the top marginal income tax rate plus a 15% investment income surcharge to mimic NI. With no inflation indexation.
So, Granny dies, that house she bought for £5k back in the 1960s is now worth £400k. 55% tax (say) on that: £217,250 cheque to HMRC please. Because Granny died.
Logic, whatever. Any government that tried that would be out of office by nightfall. On no other grounds than that we are, however wiltingly, a democracy and the peeps just aren’t going to put up with that.
Since granny bought that house in the 60’s it has been maintained, possibly extended, new kitchen, bathroom and perhaps a conservatory added. All these should be deductible from the capital gain. Sadly granny failed to keep the receipts as she did not foresee that some buffoon decades later would want to retrospectively tax her for improving her home.
The equity release business model is buggered then.
I guess he doesn’t expect to inherit anything. He never suggests taxes that might apply to him.
Does he know that you can end up selling your house to pay care home fees? The state will generously let you keep about £20K of assets if you’re in there long enough.
Just abolish IHT and stamp duty and sack enough public sector diversity “workers” to balance the books.
But I’m using that money TO MOVE INTO THE NURSING HOME!
Yeah gods, he really is as thick as munce, isn’t he.
He can’t be bargained with, he can’t be reasoned with. He doesn’t feel pity! Or remorse or fear and he absolutely will not stop!… ever… until you are dead.
It’s no great surprise that Capt. Potato who doesn’t know what a “real Interest rate” is should be flummoxed by “the time value of money”.
And nor should we put up with it. That gain is not the states and the state has no business dipping its grubby hands into the deceased’s wallet. It’s the moral equivalence of grave robbing, but given that it’s Murphy, a complete lack of morality is to be expected.
Been awhile since I’ve heard this discussed in the U.S., but polls show that inheritance tax is quite unpopular, even among leftists & people of very modest means who likely won’t have much to pass on. The normal tendency to want to highly tax anyone who earns or has a lot more than you do is much less in evidence here.
I’ve always felt that CGT wasn’t that bad a tax, as long as it’s taxing gains above inflation (using an appropriate measure – not sure which one would be best here). You can’t implement it without indexation – that’s just idiotic… And bugger a surcharge to mimic NI.
“It’s entirely possible to say that it’s taxing dead folk”: except that the Notorious Worstall keeps chattering about tax incidence which means that it’s actually a tax on the beneficiaries.
For the whole CGT business we really ought to return to inflation-correcting the gains. It was Brown, I think, who scrapped that.
“exemption (totalling £1 million, isn’t it?) on the family home.” Not quite: a married couple can get a million exempt but that includes £350k for the family home as long as it is left to descendants. Your elderly, rather poor, sister doesn’t count. Your mentally defective or physically handicapped brother doesn’t count. Nieces and nephews don’t count. Et bloody cetera.
Adopted children do count as do step-children and current or former foster children.
“It’s entirely possible to say that it’s taxing dead folk … But folks just really hate it.”
It’s the ultimate in kicking a man while he’s down. Definitely not sporting.
“Adopted children do count”
Is it possible to adopt an adult?
Jim,
Would civil partnerships work?
E.g.
married couple Anne + Bob want to inherit from Bob’s dad, Colin.
A + B get divorced, A + C enter into a civil partnership.
C dies and passes everything to A.
B remarries the widow A.
Could even work if C was A’s dad, with the civil partnership being between two blokes. Would HMRC want to perform a medical exam to ensure that bumming had been taking place? Doubt it.
I think you’re very right about the tax incidence thing, BiP. The government & lawyers may use the fiction of the deceased’s estate but as far as most people are concerned when Uncle Tom breathed his last intending they should benefit from a portion of his, as far as they’re concerned, the money becomes theirs. So if the estate is large enough to cop IHT, they’re paying tax at the highest rate they’ll do in their entire lives. Taxing the rich at those rates they might go along with. But not them. They’re poor.
“married couple Anne + Bob want to inherit from Bob’s dad, Colin.
A + B get divorced, A + C enter into a civil partnership.
C dies and passes everything to A.
B remarries the widow A.”
In that case wouldn’t Bob be able to inherit the family home anyway as the son of the deceased? It would more apply to people without their own children but who would like to leave their assets to other family members, nieces, nephews, 2nd and 3rd cousins etc.
Legally the process seems to tick the boxes. But I bet if it got to be widespread then either a) HMRC would be demanding proof that the newly married ‘couple’ were living together as man and wife (or husband and husband etc etc if same sex) and/or b) the law would pretty rapidly be changed to eliminate it somehow. Whether they would go so far as to demand ‘proof’ of the relationship be consummated is another matter……..one pinch point in the plan would be civil registrars – they could quite easily be instructed to look out for potential tax avoidance marriages, and refuse them on those grounds. My friends got ‘married’ via a civil partnership last year, and they said the registrar was pretty intrusive in terms of the questions asked etc, it wasn’t just a paperwork exercise. Several interviews, with each party separately, asking all sorts of questions. Entirely for the purposes of finding sham marriages for immigration fraud, or even forced marriages, but one could easily see that such screening could be extended very easily to tax avoidance marriages. Which will be pretty easy to spot – one old person marrying someone young enough to be their child or even grandchild.
There is a growing sentiment on the left that the problem is with democracy is that it gives the peeps a say.
A further stupidity is that this tax is on the final disposal. How do you know it’s the final disposal until death makes future purchases and subsequent disposal impossible. By then the proceeds may have been spent on a cruise around the world and nursing home bills taking it out of reach from HMRC.
Another issue is that there is no tax free amount. If HMRC is about to take the lot, gamble it from your death bed, risk free. A win means your beneficiaries could get something after the tax, and a loss means that HMRC gets nothing.
A win means your beneficiaries could get something after the tax, and a loss means that HMRC gets nothing.
That’s a cracking idea! When “assisted dying” is permitted in hospitals, I’d like the franchise for the casino next to the Euthanasia Wing.
“When “assisted dying” is permitted in hospitals”
I thought it was already compulsory? [cough] Liverpool Pathway[cough]
What have we learned today?
1) Murphy isn’t in line to inherit anything.
2) Murphy doesn’t have anything for anyone to inherit from him.
@AndyF: Perhaps we should tip off any friends that RM still has left in the Labour Party, that he wants to reintroduce appropriately stigmatized Pauper’s Graves (or even Paupers’ Graves, if that can be spun as even more outrageous).
Let everyone on here realise that we are all trolls:
This post ‘The working day’ wouldn’t be out of place in Wodehouse:
There is a rumour, much-beloved of the right wing trolls who frequent this blog a lot more often at present than the comments section might suggest, that I do not really work. Then, when I admit to needing a day off they troll again.
So, let me recount a day last week. It was Wednesday.
Six blogs were published, with comments dealt with.
Super, smashing, Great. The world is a better place for an aged accountant with an axe to grind churning out 6 pieces with almost zero quality control even on typos
Five videos were recorded (some more than once, because Thomas is more than willing to tell me when he thinks I can do better) and work with him on the edits of a couple was begun.
Not sure who Thomas is but he certainly needs to get wholesome abuse
Podcasts with AccountingWEB and Scotonomics were recorded, each being about an hour in length.
The kind of axe grinding, hatred and envy promoted has a willing audience in the SNP and other Far Left groups
The slides for a postgraduate seminar presentation were written.
I’m sure they’ll leave the course and go on to profitable careers living off the state
Preparatory notes for an undergraduate lecture the next day were reviewed
A university lecturer reviews his own work in advance. Quite an admission
And an hour was spent in a meeting with colleagues from Sheffield, the International Budget Project and the Global Initiative for Fiscal Transparency on the video series we are making, in which I have a big role.
Sounds like it could be bigger than Ben Hur
The day started before 6.30am and ended at around 8pm.
If that is shirking, I think my trolls should try it.
The grift is endless – and you should admire my persistence.
Are we sure this isn’t a satire of genius?
Folks on here are reminded that Spud does not control comments on his YouTube videos.
Folks are warned to make quick use of the pause button so you don’t have to listen to him.
The Transcript in full with Comments:
Why is there no capital gains tax charge on private houses in the UK? It’s a question that’s entirely fair to ask because we’ve all got so used to the fact that people who own their own homes don’t pay capital gains tax when they sell them. We just think it’s normal, but it is in fact a tax exemption and it is an incredibly costly exemption – the second most costly exemption in the entire UK tax system. In fact, costing in excess of £30 billion a year in the estimate of HM Revenue and Customs.
In fairness it is a fair question to ask – the answer that it’s probably unfair to tax people on something they have spent their entire adult life working to own through income that has already been taxed multiple times and the fact the state can’t run itself without pissing most of its resources up a wall is really irrelevant to someone as pathologically and relentlessly devoted to evil as Murphy.
So, is it a good exemption? Does it achieve a useful outcome? Could we do something different?
Is it a good exemption? Well, yes, to an extent. Why do I say yes to an extent? Because we would have difficulties if we charged capital gains tax – that is the tax on the increase in the value of a person’s home between the time that they bought it and the time that they sold it – every time they wish to move during their life, particularly if those moves were required, for example, by the need to change jobs. We don’t want people to be stuck in a location because they can’t afford to move because they can’t pay the tax on selling one property before buying one in another location where their work is available. So, there is a real problem with charging capital gains tax on people’s capital gains arising on the sale of their homes during their lives.
So the only barrier to charging CGT on every house sale is it would destroy mobility? Jesus Christ – the guy needs sectioning – for the benefit of wider society
But, should we end up with a situation where, as a result, a lot of people – people of my sort of age, with my sort of hair colour – are sitting on a lot of private wealth based upon the fact that they bought their own homes when they were relatively young – which was easy when I was knocking around in my 20s – and now appear to be very wealthy through nothing that they ever earned but by the chance or fortune that they bought a house when they were young.
No, that is not fair. And it’s not fair because it concentrates wealth in their hands and in the hands of the children who they can pass that wealth on to. So, we do need to tax this more than we are at present, which is by inheritance tax, which only falls on about 5 per cent of all estates in the UK?
Interestingly Clearly Murphy isn’t one of his generation sitting on a lot of private wealth. Good to have that confirmed. Explains a lot about his ‘busy me’ post as well.
We should be charging capital gains tax on every final disposal by a person or their spouse or their civil partner at the time that the last of those two ceases to use that property, whether that’s either because they die, on the second death, or because they move into a nursing home or whatever else, or both of them quit the country and move abroad. Whatever the reason, on the last disposal of a property without there being a reinvestment, which if both are dead there couldn’t be, then there should be capital gains tax charged on the whole of the lifetime gain that they’ve made.
That would be fair. It would collect serious amounts of tax. I reckon at least £10 billion a year at present, rising over time as more and more properties come within the scope of the charge.
I think Tim and other contributors summed it up – it would be a surefire vote loser at every stage.
And it would also put downward pressure on house prices – which would be good news – while also requiring that properties be sold, which would open up the market to more people who could come into it.
All in all, a win.
But we have to do such a change with care because we can’t stop people moving during their lifetimes.
The main things that would put downward pressure on housing are:
– Making house building easier
– Making other investments attractive by ending taxation on Share purchases and making all savings tax free and removing any Capital Gains Tax across the board (or reducing it substantially) – this to be paid for by reducing the DFID budget to near Zero, closing down 40 or so universities and making the staff redundant, sacking all public sector employees engaged in non productive employment and closing down quangoes and other third sector organizations that employ the likes of Murphy unilaterally
– Stopping immigration through reintroduction of the death penalty for people trafficking and reintroducing acts of attainder for those responsible, as well as hugely expanding the Rwanda scheme to other African countries and seizing the assets of those who oppose it.
All vital measures to save the country, but unlike Murphy’s vision, policies that I think would be very popular.
So what happens if you put your house in a company and charge yourself a nominal rent to live in it? No ‘final disposal’ as the company never dies, you just transfer ownership of the shares.
[P]eople of my sort of age, with my sort of hair colour – are sitting on a lot of private wealth based upon the fact that they bought their own homes when they were relatively young although I blew my modest bit of capital by stupidly libelling Lord Ashcroft, drat and double drat!
There would of course be a charge to my estate for the capital appreciation that accrued to me on The Old Orchard and which I used to settle the Ashcroft business but I’ve not considered that so it wouldn’t count.
OK let’s follow the logic of his post. CGT would accrue on all private house sales.
Why do most people sell a house? Because they want to move to a different one using the proceeds of the current one towards their purchase? But he’s just taxed the proceeds. So they now have less money to offer for the new house. And since this will be happening across the board to house sellers, the offers for houses will be lower. House prices fall. So away go a lot of the capital gains & thus the CGT raised. Would certainly take a lot of houses out of the CGT bracket all together.
I’d say this yet another example of where he doesn’t understand markets. That any transaction has to have both buyer & seller. And that “value” is a meaningless concept in markets. There is only price revealed in transactions. The money he thinks is there to pay the tax ceases to exist when he tries to tax it.
“OK let’s follow the logic of his post. CGT would accrue on all private house sales.”
No he’s saying it should accrue on the ‘final’ sale, that of the last surviving owner before they die (or when their estate sells it presumably). Not a sale when you sell one house and buy another.
Which in itself is a bit of an issue. What happens to downsizers? To take an extreme example, what if Granny sells her London town house for a chunky seven figure sum, and buys a bungalow in Bournemouth? Its not her final sale, so no tax due. So now she has several million quid sitting in her account and gives a chunk of it away to her children, and spends the rest living the high life on cruises and gin. If she survives 7 years, no IHT to pay on the gifts either. One can see a nice little line in people selling expensive houses when faced with a nursing home and buying the cheapest house they can because thats all the taxman gets his hands on, presumably. Might never live there even, but its their ‘last’ house. Maybe its the solution to places like Merthyr Tydfil and Doncaster, they would be full of little old grannies sticking two fingers up to Spud’s CGT rules.
I think, if memory serves, Thomas was the tank engine, a suitable confederate for the fat controller…
So no CGT on private homes is an “exemption”?!
I like the way the rancid potato starts from the premise that everything should be taxed, and if it isn’t, well, it’s for the kindness and benevolence of the state.
“Why is there no capital gains tax charge on private houses in the UK?”
The literal answer is that when CGT was introduced by a Labour government in 1965 that was what it decided. Easy-peasy.
@BraveFart – “he absolutely will not stop!… ever… until you are dead.”
It’s worse than that – now he’s not even stopping then!
@Rational Anarchist – “as long as it’s taxing gains above inflation”
Imagine a period with no inflation. One person buys an asset for $1000 waits ten years, and sells it for $10000 – a capital gain of $9000. Another person buys a different asset for $1000, waits one year and sells it for $10000 – also a capital gain of $9000. Do you think these two people should pay the same CGT?
@Jim – “Is it possible to adopt an adult?”
Yes and no. No because the nature of adopting someone is legally making them your child. Yes because this can be done at any age.
– “I thought it was already compulsory? [cough] Liverpool Pathway[cough]”
That’s why I am so keen on replacing assisted dying with assisted suicide.
@Jim – “Is it possible to adopt an adult?”
Yes and no. No because the nature of adopting someone is legally making them your child. Yes because this can be done at any age.
No, it’s now no and no, at least in the UK. I actually looked into this a few years ago to see if I could adopt my nephews to give them their UK citizenship back (born four days too late, dammit!). It was explicitly outlawed a least a couple of decades ago.
Whichever way you look at it, it’s bald-faced graverobbing.
Delighted to have been called an ‘experienced troll’ by Murphy. Hope I can continue to improve in this regard…
😉
Random question – not being cogniscent of anything tax related (apart from knowing the cunts are stealing far too much of it), If my estate was over the threshold and I bequeathed everything to the Taxman (not a cat’s chance, but as our host is won’t to say regarding climate change “Let’s, just for the sake of argument…..”) would the taxman have to show a chunk taken for CGT? I guess it would all go into the same pot, but would it be shown as having been deducted ?
@Adolff: presumably you mean Inheritance Tax, not CGT, as CGT is not due on a death (yet).
My guess is that your estate would be administered the same as any other one – your executors would sell all your assets, pay any taxes due to HMRC and then send a cheque for the balance to HM Treasury. Yes it would all end up in the same pot. but legally it would still have to be administered that way.
Yeah sorry Jim, IHT. Many thanks for your answer, it was just a random question that popped into my head.
“We”? Doesn’t he mean “they”?
This is the problem with the welfare state and the illusion of democracy that electoral majoritarianism lends it. People come to believe that the money-grabbing parasites lording it over us are, somehow, ourselves. (That is, it’s a problem for the governed; to the political class it’s not a bug, it’s a feature.) There’s a lot to be said for obvious illegitimacy: at least everyone agreed that the King, Emperor, or whatever was a stuck-up bastard and his tax-collectors were cunts.
But not now. Now it’s all “everyone must pay their fair share for the schoolsanhospitals” and public witch-hunts against “tax-dodgers”. There’s a line in one of Pratchett’s books (and I can never remember which): “What if you could teach the masses to grind their own faces in the dirt?”
@jgh – “No, it’s now no and no, at least in the UK.”
You’re quite right. I don’t know when it was prevented (I’m fairly sure it was once used for inheritance purposes – particularly things like titles which cannot be inherited via a will), but the Adoption and Children Act 2002 s.49 (4) says “An application for an adoption order may only be made if the person to be adopted has not attained the age of 18 years on the date of the application.” so it’s at least as old as that.