Responsibility Tax

Going into work today, to see if I can remember what it's like to be a solicitor.  There's a file there so big, so hefty and so permanent that I might try and patent it as a new building material.  Especially with faith in good old bricks and mortar so low - and about to get lower.

I've lost count of the mammoth days and Saturdays spent working in the two housing booms of the last decade.  Way before Northern Rock became Northern Pebble, lowly conveyancing-belt solicitors like me were raising their hands in class, enquiring "Sir! Sir! What's a 125% mortgage?  Are these self-certified mortgages safe, Sir?", but as the Treasury and lenders and insurers were behaving like the Vicar of Dibley with that chocolate fountain, I don't think Headmaster Brown ever really heard us.

After Brown's pension raid and periods of uncertainty with the stock market, the rush for property was inevitable.  An explosion of wildly overpriced buy-to-lets and free money led to speculator overload.  When it all fell in on itself, I almost expected the Doctor to appear and confirm that the bad guys had all been sucked into an interstitial time prison, configured in secret and only to be understood  in three series time when Steven Moffat has written the script.

But what about the extras?  Those with no Equity card, and now with less equity.  Those who were encouraged by government to go and stand on set, and perhaps have a go at investing in property in a small, personal way?  All those people who believed that buying a bigger house, or maybe even a second one, was the best way to save for their old age.  An old age which could easily require long term care.

The collapse in the housing market has meant that retired people, looking to downsize and realise some of their savings, haven't been able to do that.  HIPs cost for the seller and high stamp duty for the buyer, plus a drying up of credit have had careful pensioners trapped in their big houses on little incomes.  That's why I didn't like the thinking behind the Lib Dems' mansion tax, and why I approved of the Conservatives raising the inheritance tax threshold (although, maybe £1m was a bit generous once house prices started to fall).

Now we have a similar threat to those who placed their savings in a second property, especially on the verge of retiring.  No mortgages available at that age, so maybe using matured policies (contributions taxed) and savings (interest taxed) to buy a property.  Earning a little income (taxed) and maybe having some equity to help pay for old age.  Come to sell it now - even at the deflated price - and you'll have even less money than you expected.

The Lib Dems - and now the ConDems - call capital gains tax (CGT) a voluntary tax.  In a business setting it can be rolled over or legitimately avoided, even set off against losses.   If it's a professional investment setting, you can hang onto it or take the CGT hit as part of usual investment business.

But if it's your second property is your personal savings vehicle, you're going to need to liquidate it.  To live on, to help your children get on the housing ladder, to help with grandkids' tuition college fees and, ultimately, to pay for care.  The things you planned to do, carefully, responsibly.  You were promised a tax-efficient way to save.  Now - when you've retired and not in a position to alter your plans - the new government wants some of your savings as additional tax.  CGT is not a voluntary tax for you.

You meet many pensioners when you're knocking doors during a general election.  Those who'd looked after themselves and put a bit by - just enough to keep them in the lower income tax bracket.  They inevitably thought the Lib Dem policy of raising the income tax threshold was "fair".  They didn't think the same way about the corresponding desire to clobber some of them with higher CGT.

Gordon Brown, the Golden Chancellor, effectively told them that saving in property was the only safe way to save (remember SIPS?).  Should a new government punish those who believed him?