mm1 820x410 - A look at Surrey’s history and today’s tax climate

A look at Surrey’s history and today’s tax climate

Surrey is one of the historic counties of Britain. The most striking thing about Surrey is perhaps the Surrey county cricket club, one of the first cricket clubs in existence. Surrey began as a fishing hub during the time of the Semiahmoo, Katzie and Kwantlen people, and the agricultural landscape is ever so prominent today.

We start from the early modern age when the Tudors occupied Surrey. It was an age of prosperity for the county, with great castles built in those parts. It was an important industrial hub, previous known for its blooming cloth and textile industry. Later, the iron industry took over and contributed majorly to the local economy.

Surrey was governed by a county council in the 1800s under Newington area. It’s 11 districts were spread and scattered across. However it was not officially a city until the early 1990s, when parts of the county were recognized under the Greater London area.

Properties here are governed by council taxes, as is the case with the rest of Britain. In the 1800s, the land taxes were administered strictly in the county, with people ineligible to vote unless they had paid their due land taxes. Later on, the need for land tax assessments were removed with electoral registers coming in.

mm2 - A look at Surrey’s history and today’s tax climate

We turn our attention here to a recent announcement on council taxes in Surrey. In February 2018, the local council voted to increase council taxes by an astonishing 6% on average, meaning that each individual should pay up an additional GBP 1.53 a week. The announcement came after a legislation from the central government in the end of 2017 that allowed local councils to hike the council tax independently.

The key reason for the increase in Surrey council taxes was as a result of widening definite and a lack of funding from the central government. As a result, alternative means of increasing revenues had to be identified. Government funding to Surrey had reduced by a net total of GBP 200 million in a period of 7 years.

The local government however aims to lead infrastructure and development projects that are both sustainable and can increase future revenue streams. This should enable a situation where the council taxes can be gradually reduced to perhaps less atrocious levels. We believe this is economically feasible.

using a calculator

3 market factors and trends that impact your property’s value

We always have the concept of an ideal home that we own. People use more or less a basic set of criteria to decide whether an investment in a home is justifiable. These criteria include things such as price, neighborhood safety, amenities, resources and happiness factor.

Beyond the basic set of criteria, it is also important to keep in mind future trends that affect the value of a property. This is because most people today don’t stay in the same property or house for their entire life. Normally you start off with a small house, upgrade to a larger one when you have a family and more disposable income, and finally downgrade to a smaller home during your retirement years.

This means that on average, you will buy and sell up to three properties in your lifetime. With that as the case, it is important to make the right choice at each purchase or sell decision. The right choice includes considering future trends associated with a particular property or neighborhood when you put in the investment.

Supply levels

With house building in the UK increasing by 20% annually as of 2017, supply is ramping up. When supply increases, price point lowers. Certain neighborhoods have more vacant land and have the possibility of having more homes. If few of these neighborhoods are located in far-off, undesirable places, it is possible that demand doesn’t match supply, and property prices overall in those areas decrease.

jj - 3 market factors and trends that impact your property’s value

Mortgage rates

Mortgage rates also have an impact on supply, whose effect we saw in the above sub-category. Mortgage prices have remained at historic lows, and as per the government’s promise, will continue to do so. However, keeping a look at global trends is useful since that can cause unexpected ramifications to Britain.

Real estate as an asset

While real estate remains and probably will remain the most stable asset, the emergence of numerous alternatives can mean that investors increasing prefer other asset classes for personal and institutional investment. If your neighborhood has a huge proportion of properties that are pure capital investments and not residential purchases, it will be volatile to factors such as interest rates and emergence of alternative asset classes, all of which are beyond your control.

These trends are important to keep in mind. While you cannot control everything, think of a home as an investment as much as an emotional decision. We have published more factors to consider when buying a property in another post here:

img7 820x410 - 3 key reasons why the hearth tax was unpopular in Britain

3 key reasons why the hearth tax was unpopular in Britain

The hearth tax was a revolutionary policy in the 1600s and set the trend for tax collection and proper recording. While at the institutional level it simplified and made transparent the entire process, the public reception was not very favorable. Read more about the introduction at

At the broader level, the tax system is adept at measuring wealth inequality and taking measures to bring down the levels. The system was fair in its design, as wealthier property owners paid twice as much as the average property owner. Property owners who owned properties worth more than 20 shillings paid 2 shillings in annual tax (10%) whereas the rest paid 1 shilling.

Let us begin by neglecting the most widespread cause of unpopularity, which is that tax evasion was no longer possible. This is not a reason that should at all be factored, as it is every citizen’s duty to pay tax. With transparency and proper recording of tax records, tax evasion could easily be monitored and eradicated.

It was not so much the design and the intent of the tax system, rather the execution and administrative complexities that made it unpopular at the time. The structure allowed the role of private tax collectors, who could enter homes and collect taxes, which were then passed to the crown. However, due to a lack of proper execution, there were cases where tax information was incorrectly passed on.

This happened when tax collected visited homes when people were away. In some cases, they tried to count the number of chimneys in a house from outside in order to determine the number of hearths. This resulted naturally in incorrect counting and wrong tax calculations. This created dissatisfaction and outrage among some sections of the community.

In some other cases, people would deliberately not answer the doors when the tax collectors came, to avoid paying taxes. The same outcomes resulted from such situations, although in this case it is hard to blame execution. You cannot forced someone to enjoy paying taxes!

There were also loopholes that were fully exploited by citizens. For example, in those times it was possible to evade tax by declaring yourself to be poverty-stricken. Such declarations were easily possible by downgrading to a home worth very less, which would indicate that you are poor. These was no comprehensive check on all means of finances at the time.

The situation could have been tackled in various ways, mainly by proper communication. When the tax was introduced, the full disclosure of what the tax revenue will be used for, and what kind of future benefits it could produce to the very same citizens that pay up initially, would have resulted in relatively more willingness to pay taxes. These are lessons for the future.


It’s not just tax, governments have other revenue sources too!

Let us begin with macroeconomics. All of us have studied this at some point or the other. Macroeconomics presents the concepts of tax, public spending, deficit, trade imbalances and recession. These concepts are crucial to understanding the current economic context.

Every institution, individual, company or government has sources of revenue and sources of expenses. When it comes to government, the key revenue source is taxation. Taxation can come in many forms – income, capital gains, property, wealth, inheritance, pensioners and corporate. With each of these tax types, there are usually different slabs catering to different categories of taxpayers.

Why is tax important? Let us begin with the annual budget. At the beginning of every fiscal year, the government releases an annual budget for its expenditures. Expenditures range from key categories such as trade, education, social service and infrastructure, to minor categories such as foreign aid and presidential /royalty expenditures. All these expenses are meant to serve the citizens of a nation, ergo are funded by the citizens’ income.

mon2 - It’s not just tax, governments have other revenue sources too!

When there arises a situation wherein tax revenue exceeds expenditures, you have a fiscal surplus. And vice versa, when revenues fall short of expenditures, you are faced with a fiscal deficit. While both situation are not ideal, fiscal deficits can potentially lead to more disastrous consequences. When governments try to win the popular vote by reducing tax when they are not supposed to, their fiscal situation becomes unstable and they can fall into serious debt issues.

It is obviously important to keep a balance between fiscal stability and the overall public health. This is the reason why tax has not just one lever, but several. When there are looming threats of wage disparity or unemployment, you move the levers of taxation such that the policies don’t negatively affect the middle-class or lower income earners. When you are faced with the threat of domestic investors finding the local situation a tad too unfair and moving their investments abroad, you adjust (to an extent) levers that affect the wealthy such as wealth, property and capital gains taxes.

img5 - It’s not just tax, governments have other revenue sources too!

If the government would like to keep tax rates intact and still is in dire need to raise revenue, there are always other sources. However these need to be planned in advance and cannot be exploited as easily as tax levers. Two additional revenue generating means for the government are trade and external loans. In times of surplus, governments can consider issues loans to foreign institutions or governments to rely on a predictable interest stream for the future.

There is also trade. Countries like Germany enjoy the flexibility of tax adjustment decisions due to the immense trade surpluses that they enjoy, Naturally trade surpluses have their own pitfalls, but when it comes to revenue sources they are as good as any. So citizens, take note! When you are doubting the effectiveness of a policy designed to increase revenues, it is good to have the full situation known.

re2 820x410 - The challenges of property tax in developing countries

The challenges of property tax in developing countries

When it comes to developing countries, every is complicated. Setting up a system and administering it is not an easy job. Most developing countries have a problem when it comes to population density, which complicates the issue further.

Property tax administration is no exception to this rule. Developing countries face rampant corruption and bureaucratic nightmares. The concept of Black money, commonly termed so in countries like India and other parts of Asia, is especially prevalent in property investment transactions. Black money is the concept of money on the table that is not revealed to government officials so as to avoid taxation.

Let us assess the current scenario. Property tax is a difficult tax structure to govern and administer, unlike more straightforward cases like income taxesor sales taxes for a chiropractor in virginia beach. It depends on three factors to function – Decentralization, administration and visibility. Property taxes function best when they have a high degree of decentralization and are independent in nature, something that is not the case in most developing nations.

In terms of administration, property taxes are expensive to maintain and difficult to modify. It is closely related to visibility, wherein once after you introduce a modification it is not so easy to track the effects of such a modification. It is hard to punish delinquency as there aren’t many “fair” punishments. If you seize a land, this becomes an extreme form of punishment that can be met with political retaliation. Cutting of utilities, something that has been tried in some nations, doesn’t work well as well.

re - The challenges of property tax in developing countries

At the same time, abolishing or replacing property tax doesn’t make sense for a government. They are revenue generating and fair means of jurisdiction. They create a sense of equity and fairness. Wealthier people who own multiple properties pay more tax to prevent them from purchasing even more and driving up home prices.

Which means the only solution is efficient reform. In countries where manpower is not available or not efficient, technology is the safest bet. There is an immense initial task of identifying and tagging each property or land space that is present. This is being done currently in Bangalore, India, where unique property identification numbers are linked to tax records.

While technology is a good starting point, there needs to be a concerted effort from elected officials and tax officials. Central governments should ensure that the administrative process is not complicated, incentivize local officials to collect tax and not engage in bribery or other forms of corruption.

And finally, incentivize citizens to pay tax by reducing bureaucratic hassles. Payment in post offices, banks, selected convenience stores and online means are good starting points.

img2 820x410 - A look at the history of Income tax in Britain

A look at the history of Income tax in Britain

Income tax is the most common means of tax that we are used to. As the name suggests, it is a tax on the income earned. It is the greatest example of socialism in today’s world and is based on the principle that everyone who receives income has an obligation to provide part of it for the cause of the greater good.

In this post, we look at the historic context of income tax in Britain. It was first introduced in 1798 by William Pitt the Younger. The intention of this tax structure at the time was to raise revenue to buy military equipment for the war with Napoleonic France. In a sense, people contributed part of their income to the crown to ensure the safety of themselves and their fellow citizens.

When it was introduced, it was quite nascent and its objective was to raise an annual revenue of GBP 10 million. It resulted only in 6 million in reality. One of the reasons was that at the time of introduction, the tax only applied to wealthy people above a certain threshold. Later, however, the threshold was widened to increase the collectible revenues.

img - A look at the history of Income tax in Britain

With time, its structure was solidified by adding many of the concepts we can see today in modern Britain. For example, the concept of debiting the tax directly from source was introduced in 1803 by Henry Addington. There, however, remained a controversial aspect of implementing a tax during times of war. This became especially significant after the historic battle of Waterloo, when people were poorer and the tax came as a heavy burden on them.

As a result, the tax was repealed in 1816. But as is always the case if you recall basic macroeconomics, tax appears in significance when there is a widening deficit. This was exactly the case in 1842, when the tax was reintroduced. To avoid earlier controversies, it applied again only to the rich, and remained so for many, many years.

The colonial era began and the sources of tax began to shift increasingly towards the colonies, especially wealthier ones at the time such as Africa, United States and India. British citizens enjoyed a period of prosperity, unburned by the shackles of taxation. We can say with certainty that tax was not a public burden till the beginning of the 20th century.

The 20th century saw the rise of significance of taxation, especially due to the universal appeal of socialism as a way to reduce widening inequality. Of course, there was also the contentious issue of military spending during the two major world wars. The tax rate became 30% by the end of the 1st world war and covered an average on 10 million British citizens.

The tax rate has stayed at these levels and has increased further. IT shows no signs of slowing down. Across Europe, a range of 30%-50% is the new normal today. One can only wonder what the situation would have been had there been no wars.

app2 820x410 - 3 factors that you should consider before buying a property

3 factors that you should consider before buying a property

Most of us own a property or aim to own a property in the coming years. Since ages, owning a property has been a symbol of status, security and importance. Property is an asset that appreciates slowly but significantly over a period of time, and isn’t as volatile as most other assets. Well, assuming we don’t witness another sub-prime crisis of the extent of 2009!

Before starting the journey of property hunting, there are things to note including administrative processes, rights, taxes, responsibilities etc. We assume that you have read up on basic things such as prices, location significance, neighborhood and average price increases in the area. Let us look at some key items you should be aware of that the average home buyer doesn’t think of.

app1 - 3 factors that you should consider before buying a property

Interest rates

For a decade now, global interest rates have remained at a historic low. In the UK, it has hovered around the 0.5% mark. However, with reports that the bank of England is set to raise rates above the 0.5% mark, home buyers should exercise caution. Borrowing mortgages, especially considering the average price of a London house, and rising interest rates don’t go well together. Funding part of the investment with a downpayment is recommended.

Negotiation doesn’t end

There are cases where negotiations are finalized, a contract is signed and something new pops up during further home inspections. Remember that your negotiation when buying a property should always be active till ongoing inspections are complete. You don’t want to have unpleasant surprises after you move in!

app3 - 3 factors that you should consider before buying a property

Long-term tenancy

We know you want to have your own property, and we understand. However, owning a home comes with its own set of hassles. Consider, perhaps, an option of a long term tenancy, which can be available for 99 years or 199 years depending on where you are located at. It offers the same benefits of ownership such as security and stability, with less hassles.

These are just three aspects to consider before signing on the piece of paper. A thorough evaluation will ensure you don’t have regrets later.

1 2 3