Taxes are the main source of income for any elected government. There are quite a few types of taxes you pay without even realizing and we want you to understand the taxes on the things that you own, not to defy it, but to get a better understanding of the complexity that is property tax.
It is not like everyone must pay every tax there is, but there are certain taxes that you must pay when you own something. Let’s get down to the basic understanding of how all the taxes on the things you own fit together and how they impact the economy and the government revenue.
Property tax (also known as ad valorem tax) is the tax imposed on the value of property you own, either for business or personal purposes. The rate of property tax keeps fluctuating, and this depends entirely on the condition, location, or the value of that particular property in the market.
It is important to grasp that this type of tax is not only for real estate, but also on automobiles, boats, and private jets. Factories and warehouses are also included in this list.
Tangible personal property tax
Tangible personal property (TPP) is the property that an owner can move according to their preference or need like furniture, an item in an inventory of a factory or warehouse, or business equipment. This tax does complicate it for many business owners that have to move their business equipment and machinery as it drops the productivity level quite a bit.
Estate and inheritance tax
If you inherit an estate from a relative who is no longer alive, you will have to pay an inheritance tax, even though the estate tax is paid by the estate itself. However, estate tax is applied before the property is distributed. Both these taxes are complex and hard to register for administration. It also causes high inherent property owners to move from the state or country too.
Wealth taxes are applied annually when an individual’s total wealth gets above a certain threshold without having to pay any debt. Over time, many governments have decided against this tax because it discourages people from pursuing entrepreneurship and starting their own businesses. And not a good amount of revenue as compared to the difficulty of registering these taxes.
You will have to pay Stamp Duty Land Tax whether you are buying outright or with a mortgage if the property you are purchasing costs over £250,000. This tax applies to both freehold and leasehold properties.
Capital Gains Tax
Capital Gains Tax is charged when you sell a home that you have rented out, used to run a business, have not used it as the main house you lived in, or is bigger than 5,000 square meters (just over an acre).
You may think property tax is quite high, but it is also important as governments provide critical services and infrastructures like police services, fire services, schools, roads highway construction, etc., and it also shapes the local housing markets by influencing its costs.