Road pricing back on the agenda to replace loss of fuel and vehicle excise duty due to electric vehicles?

[radamfi]

Not at all. I am saying this because I do not want to pay, for example, £550 per month for something that I will never own. And, I do not want to be paying rent once i retire and claim my pension, the idea being that i will be mortgage free before stop working. £550 out of my monthly pension, per month, no taaa.

But if you had grown up in another country that has a renting culture, you wouldn't even think in those terms!

As an aside, it generally makes financial sense to sell your house when you get to retirement age as the equity should easily cover rent plus a reasonable standard of living without even needing to touch pensions and investments.

 

[WestRiding]

But if you had grown up in another country that has a renting culture, you wouldn't even think in those terms!

As an aside, it generally makes financial sense to sell your house when you get to retirement age as the equity should easily cover rent plus a reasonable standard of living without even needing to touch other pensions and investments.

I will never sell my (eventually) paid off house to keep paying rent. One day it will be passed on to someone too. Maybe you have a point, if I grew up in Belgium or something. But I did not. My pension is for me to enjoy, not pay rent from. The only way I would sell my house after retirement would be to BUY something smaller and take a bit of the money for me, but would not rent out of it. And, its security for if ever i needed a care home, something you wouldn't have while renting. (worst case).

 

[Bletchleyite]

As an aside, it generally makes financial sense to sell your house when you get to retirement age as the equity should easily cover rent plus a reasonable standard of living without even needing to touch pensions and investments.

No, it doesn't, unless it's too big (because your kids have moved out) in which case it makes sense to downsize to a smaller house or flat.

What makes sense is to live, rent-free, in the house you have spent your life paying for.

 

[WestRiding]

No, it doesn't, unless it's too big (because your kids have moved out) in which case it makes sense to downsize to a smaller house or flat.

What makes sense is to live, rent-free, in the house you have spent your life paying for.

Couldn't have said it better.

 

[radamfi]

No, it doesn't, unless it's too big (because your kids have moved out) in which case it makes sense to downsize to a smaller house or flat.

What makes sense is to live, rent-free, in the house you have spent your life paying for.

But if you don't have many years to pay rent then you can easily afford that from the house sale proceeds, especially if it is invested properly. You might even be able to rent a property in a more expensive and desirable area. With an overpriced housing market there's an argument that selling to rent is a wise move for almost anyone, as they might be able to buy back into the market in a few years time and potentially save tens of thousands of pounds.

 

[Bletchleyite]

But if you don't have many years to pay rent

How on earth are you going to know that? Why would you want to?

You might even be able to rent a property in a more expensive and desirable area.

Or you could buy a smaller property in a more desirable area, if you wanted. And then it's yours to make it how you want it.

With an overpriced housing market there's an argument that selling to rent is a wise move for almost anyone, as they might be able to buy back into the market in a few years time and potentially save tens of thousands of pounds.

There is not going to be a house price crash. People have been talking about it for years and it just won't happen; the conditions that caused the one in the 1980s were artificial based on political control of interest rates which is no longer the case. There may be a stagnation or a slight reduction at most.

The market is not overpriced per-se; prices are high because of high demand and low supply. The UK is not the most expensive country in the world for housing.

If you own property, there is no sense in selling to rent unless you have an extenuating circumstance which causes you to need capital, e.g. you lost a legal case and owe a lot of money.

 

[radamfi]

How on earth are you going to know that? Why would you want to?

If you are 70 then chances are you've got 10-15 years of good life left maximum. After that you are unlikely to be able to spend much money even if you wanted to.

Or you could buy a smaller property in a more desirable area, if you wanted. And then it's yours to make it how you want it.

But you've still got your money tied up in the housing market when you could be using it to enjoy your last few years alive.

There is not going to be a house price crash. People have been talking about it for years and it just won't happen; the conditions that caused the one in the 1980s were artificial based on political control of interest rates which is no longer the case. There may be a stagnation or a slight reduction at most.

There was a huge house price crash only a few years ago. The south largely escaped that but the north and especially Scotland and Northern Ireland took years to recover. Ireland and Spain obviously even worse. I believe some areas in the UK are still cheaper than they were in 2007 when you take inflation into account.

If you own property, there is no sense in selling to rent unless you have an extenuating circumstance which causes you to need capital, e.g. you lost a legal case and owe a lot of money.

Or if you actually want to take advantage of your capital before you die.

 

[Bletchleyite]

If you are 70 then chances are you've got 10-15 years of good life left maximum. After that you are unlikely to be able to spend much money even if you wanted to.

My grandfather lived to 97, for what it's worth. This sort of thing is going to become more common.

And people have children and grandchildren, who they would want to benefit from the equity after the costs of care have been taken out of it (another reason to have that asset).

But you've still got your money tied up in the housing market when you could be using it to enjoy your last few years alive.

You're not going to be able to enjoy it because you'll be frittering it away on rent to live in a lower standard of property.

There was a huge house price crash only a few years ago.

No, there wasn't. There was a small reduction.

You are clearly anti-home-ownership, which is fine - choose to rent if you want. But most people see advantages in ownership if they have the means.

 

[radamfi]

You're not going to be able to enjoy it because you'll be frittering it away on rent to live in a lower standard of property.

As I said, chances are you could probably afford to rent something better than what you have.

No, there wasn't. There was a small reduction.

In Northern Ireland, house prices went down 53% between 2007 and 2012.
In Scotland, they went down 13% over the same period.

The above doesn't take inflation into account. Inflation was 11% over that time.

 

[miami]

Most public transport is by bus, and generally those who go by bus outside of London are the poorest segment of society.

Most bus use is in London, bus miles are far lower than rail miles, but 56% of public transport is bus use.

When it comes to commuting though, 68% is by car, 10% by rail and 7% by bus. In the North West, 76% of people drive to work, 7% take a bus, 4% a train (table tsgb108). In London it's 14% bus, 41% rail+underground.

55% of transport spending goes on rail, 31% on roads, 8% on buses.

You make a compelling point that rail spending should be slashed dramatically and the money channeled into buses.

The obsession with home ownership doesn't help, meaning it is harder to relocate.

Not just home ownership, I don't want my kids to have to move school every 2 or 3 years when one of us gets a new job. And what exactly happens when one person's job is in one place and another is 20 miles away?

But if you don't have many years to pay rent then you can easily afford that from the house sale proceeds, especially if it is invested properly.

Around here, a £250k house rents for about £1k a month. Selling it would thus require a 5% roi to pay rent. Annuity rates for 65 year olds are in that ballpark (about 4.5%), but not once you link in inflation (they halve). Obviously there's no maintenance costs, but it's certainly not in the realms of "easily afford", and of course you would have £0 to leave when you did die. Aged 70 you would just about get enough inflation linked to pay for the mortgage.

Inflation was 11% over that time

And houseprices have pretty much recovered in cash terms. Sure, sell at the peak in 2007, invest in amazon and you're sitting pretty.

What happens when you sell, house prices shoot up, the stock market crashes, and rents double over the course of a decade? At least if you own somewhere you know you have somewhere to live.

In Feb 2009 Scottish average house prices bottomed out at 121k. They are now 161k.

£121k in 2009 is worth £163k in 2020, so about even. Why do you think there'll be another crash.

What investment instrument *guarentees* that £120k, or even £160k, will return £500 a month to rent that £121k house, and have returns growing with inflation (so returning £680 now)? The peak in Scotland was Sep 2007 at 142k.


If you could predict the crash then sure, sell at £160k, rent a year, then buy at £120k. If you know the future you'd have been better off buying shares in companies like Tesla and Amazon.

 

[The Ham]

No, it doesn't, unless it's too big (because your kids have moved out) in which case it makes sense to downsize to a smaller house or flat.

What makes sense is to live, rent-free, in the house you have spent your life paying for.

IF you wish to rent then you could do this by renting out your larger home to someone else and renting a smaller property to live in.

 

[Bletchleyite]

IF you wish to rent then you could do this by renting out your larger home to someone else and renting a smaller property to live in.

That's also an option, and retains your investment in property, which long term will always grow overall.

Also don't forget the effect of inflation on your monthly mortgage payments. You buy a house costing, say, £200K, and your mortgage payments are, say, £750 a month (random figures, not based on any calculation). Provided interest rates don't go up substantially, which as the Bank of England are managing them prudently rather than politically now they are unlikely to, in 20 years' time they will still be £750 a month[1]. However, in real terms that will be something like half what it was when you stretched yourself to buy (as everyone does).

This has two big advantages, you can pick one or the other or blend the two as you wish. Either that means you pay less for a roof over your head than you did when you first started and so can perhaps step down in work terms to an easier job nearer retirement, or it means you can up the payment alongside inflation and pay your mortgage off quicker. Or you can mix the two by upping it not quite in line with inflation.

Whereas if you were renting, if it was £750 a month rent at the start, it'd be £1500 at the end, because rents go up at least with inflation (sometimes even in excess of it).

[1] Actually they won't be, it's even better than that, they'll go down because the more equity you have, the cheaper mortgage interest rates get.

 

[The Ham]

That's also an option, and retains your investment in property, which long term will always grow overall.

Also don't forget the effect of inflation on your monthly mortgage payments. You buy a house costing, say, £200K, and your mortgage payments are, say, £750 a month (random figures, not based on any calculation). Provided interest rates don't go up substantially, which as the Bank of England are managing them prudently rather than politically now they are unlikely to, in 20 years' time they will still be £750 a month[1]. However, in real terms that will be something like half what it was when you stretched yourself to buy (as everyone does).

This has two big advantages, you can pick one or the other or blend the two as you wish. Either that means you pay less for a roof over your head than you did when you first started and so can perhaps step down in work terms to an easier job nearer retirement, or it means you can up the payment alongside inflation and pay your mortgage off quicker. Or you can mix the two by upping it not quite in line with inflation.

Whereas if you were renting, if it was £750 a month rent at the start, it'd be £1500 at the end, because rents go up at least with inflation (sometimes even in excess of it).

[1] Actually they won't be, it's even better than that, they'll go down because the more equity you have, the cheaper mortgage interest rates get.

You'll also be able to take a small income from your larger home (not a lot after fees, but possibly enough for a couple of treats).

Of course the other option would be to split your capital in your home so as to get a buy to let a few years before you retire and pay down the mortgages whilst you're still earning and them as time passes you can start to take a larger and larger income.

Hopefully to the extent that if you needed to pay nursing home fees that the other property would at about one week's worth of fees.

If you live alone, then with your own property as well you could then rent that out as well to cover half your nursing home fees.

 

[miami]

IF you wish to rent then you could do this by renting out your larger home to someone else and renting a smaller property to live in.

You rent somewhere out for say £12k a year

You spend £2k a year on management and other expenses that you wouldn't normally incurr, leaving you £10k

You get taxed on that £10k profit - either £2k or £4k depending on your pension

You rent somewhere for £6k a year, leaving you maybe with £2k for all that effort. Not a great deal.

 

[WatcherZero]

You can offset the gross revenue against mortgage payments for the property meaning your net taxable income is a lot lower than £10k.

E.g. You own a large house mortgage free. Re-mortgage it and rent it out and use the money from the re-mortgage to buy a smaller property to live in rent free.

 

[Starmill]

What makes sense is to live, rent-free, in the house you have spent your life paying for.

Only if the property was a good long-term investment. This is the problem with the British mindset: everyone just assumes it will be because it has been for a long time. If you're buying a house in the first quarter of 2021 there's absolutely no guarantee that 30 years later that will have turned out to be the best of the many investment choices. What is more houses aren't very versatile assets. They don't produce innovative things and people loading up on property assets takes cash away from investment in actual production capacity.

People have been talking about it for years and it just won't happen

Not with the current government, no way. But we're dealing with 30 year timescales here at least. If you'd said to someone on 1 January 2011 that in 10 years the UK would have left the EU, the Single Market and the Customs Union they would have called you crazy, and wouldn't have known what the word Brexit meant. A referendum wasn't even vaguely on the cards. Nobody knows what's coming that far into the future.

 

[Mintona]

I drive around 25000 miles a year, mostly to and from work. I wouldn’t be overly keen on paying £25000 a year just to use the road, especially as public transport can’t deliver me to work at the times I need to start.

 

[Bletchleyite]

Only if the property was a good long-term investment. This is the problem with the British mindset: everyone just assumes it will be because it has been for a long time. If you're buying a house in the first quarter of 2021 there's absolutely no guarantee that 30 years later that will have turned out to be the best of the many investment choices.

I think you've rather missed the point there. The point isn't that the house is a solid financial investment, because by the time you sell it you're dead and don't care about that[1], and nobody should ever plan to live off inheritance because there's always the possibility their parents will outlive them, it's just one of the very few good things you may get off the back of a very sad event. The point is that you own it outright, so provided you've maintained insurance and done your due diligence on purchase so you know it wasn't about to fall down, you have a much lower cost of living than someone who rents, and now pays a rent that has increased substantially by inflation.

The only way that can go badly enough wrong to make it a bad thing is if you make a poor choice of location, really, e.g. it floods frequently, or if something serious comes to light e.g. flammable cladding, which happens only in a fraction of cases.

Otherwise, you will always be substantially better off if you retire owning the house in which you live than if you retire renting.

[1] Or you need to sell it for care-home fees, but in that case you're also better off than renting because you have some capital rather than no capital.

 

[edwin_m]

I drive around 25000 miles a year, mostly to and from work. I wouldn’t be overly keen on paying £25000 a year just to use the road, especially as public transport can’t deliver me to work at the times I need to start.

If there is no public transport at the times you need to be at work, then a road pricing scheme shouldn't be imposing a heavy charge for travelling at those times. However if you drive 50 miles to work and back each day, then you are contributing more than most to the social and environmental costs of car use. Paying more in road pricing charges would be an incentive to look at alternatives.

 

[Bletchleyite]

If there is no public transport at the times you need to be at work, then a road pricing scheme shouldn't be imposing a heavy charge for travelling at those times. However if you drive 50 miles to work and back each day, then you are contributing more than most to the social and environmental costs of car use. Paying more in road pricing charges would be an incentive to look at alternatives.

One particular thing it might achieve is to encourage the use of park-and-ride sites. If it cost 10p/mile to drive from your rural village which doesn't have any public transport to an Oxford park and ride, say (to use an example of a city that has a very developed P&R system and a very rural hinterland) then £5/mile to drive the rest of the way into Oxford, you would certainly use the P&R even if it involved getting up earlier for work. Whereas if your employer provided parking and it doesn't cost extra, you're fairly likely just to drive all the way.

 

[The Ham]

I drive around 25000 miles a year, mostly to and from work. I wouldn’t be overly keen on paying £25000 a year just to use the road, especially as public transport can’t deliver me to work at the times I need to start.

It's highly unlikely that road pricing would be as high as £1/mile (even in fairly congested areas).

A few things of note, WFH would likely change road use (further cutting road generated taxes), which could reduce some of miles done by those who do large miles each year.

If the mileage rates were that high it would probably encourage people to move closer to work (a reduction of 5 miles each way at 50p/mile would save about £1,250/year) if they do big distances (probably not worth it for 5 miles, but 10-15 miles shorter and the savings could start to be quite noticeable).

Chances are for rural roads with little traffic then the charge would likely be zero, unless you use such routes to avoid other roads with a charge. As an example if I live in a road parallel to the A303 is not be charged to use it, but someone using it to bypass congestion in the A303 would be charged the same charge as using the A303.

 

[philthetube]

I drive around 25000 miles a year, mostly to and from work. I wouldn’t be overly keen on paying £25000 a year just to use the road, especially as public transport can’t deliver me to work at the times I need to start.

If road pricing stops this sort of commute then I would look at it as a success

 

[Mintona]

If road pricing stops this sort of commute then I would look at it as a success

Lord knows I don’t do it for the sake of it. But I have to live where I live because it is close to my wife’s place of work and near to my mum for 24 hour childcare.

 

[radamfi]

Lord knows I don’t do it for the sake of it. But I have to live where I live because it is close to my wife’s place of work and near to my mum for 24 hour childcare.

You only do it because it is within the tolerable parameters governed by technology and economics. Suppose there a new mode of transport is invented that can get from Inverness to Plymouth in 5 minutes. The cost in fuel is 5p. It would make commuting between those places viable. But what if the environmental and social cost of one such trip using that new mode of transport is equivalent to one million miles of car driving? That would then make it unacceptable.

 

[gaillark]

You can offset the gross revenue against mortgage payments for the property meaning your net taxable income is a lot lower than £10k.

E.g. You own a large house mortgage free. Re-mortgage it and rent it out and use the money from the re-mortgage to buy a smaller property to live in rent free.

That was the case. Tax relief on mortgage payments is now ending. We are currently in transitional relief and within three years there will be zero relief. This change was made several years ago in the Budget. There is also includes a 3% surcharge on stamp duty land tax for second homes so the ecomonics have change a little.

 

[WatcherZero]

Yes for personal mortgage payments its being replaced with a flat 20% relief so if your a higher rate taxpayer your worse off, but the answer is to incorporate. You will face a once off stamp duty payment for transferring the assets from private ownership to a ltd company but only 1% on the value of the property above £500k.

 

[AM9]

Yes for personal mortgage payments its being replaced with a flat 20% relief so if your a higher rate taxpayer your worse off, but the answer is to incorporate. You will face a once off stamp duty payment for transferring the assets from private ownership to a ltd company but only 1% on the value of the property above £500k.

Which looks like an abuse of the tax system intended to avoid paying tax which is normally expected from a salary in the higher rate band.

 

[The Ham]

Which looks like an abuse of the tax system intended to avoid paying tax which is normally expected from a salary in the higher rate band.

It's certainly a flaw in the tax system, not sure that something that is allowed could be called an abuse of the tax system though.

The other tax benefit from such a change would be that if you were looking to rebuild then there would be no VAT to pay (which is part of the reason rebuilds are better value than refurbishments as the costs can be less and get a better outcome).

 

[Mintona]

You only do it because it is within the tolerable parameters governed by technology and economics. Suppose there a new mode of transport is invented that can get from Inverness to Plymouth in 5 minutes. The cost in fuel is 5p. It would make commuting between those places viable. But what if the environmental and social cost of one such trip using that new mode of transport is equivalent to one million miles of car driving? That would then make it unacceptable.

Ok but that’s a hypothetical. Everybody’s circumstances are different. Provide 24 hour public transport and I’ll use it.

 

[radamfi]

Ok but that’s a hypothetical. Everybody’s circumstances are different. Provide 24 hour public transport and I’ll use it.

Does that exist in rural areas anywhere in the world?

The point is your commute is only possible because of the invention of the car and petrol and motoring has become sufficiently cheap in relation to incomes.