LVT Calculator
How much would you have to pay after a transition to Location Value Tax? Would most people have to pay more or would they actually end up paying less? The purpose of the calculator is to provide tool to act as guide. It's aim is to be "roughly right" rather than precisely wrong. Because the amount of LVT varies with location the amount anyone has to pay will differ from place to place. The calculator has information on Site premiums for each post code district that enable this to be done. Anyone can put in their personal details and find out how much better or worse of they would be if there was a tax shift to LVT, initially replacing all current property based taxes. However it goes further than that and allows you to explore the effect of replacing other taxes such as PAYE and VAT with LVT in a way that is overall tax neutral. You can see the speadsheet here and below is a set of user instructions. The live version of the spreadsheet that you can explore putting data in is here.
“LVT Shift – Impact on Households” Ready-Reckoner - User’s instructions
1. If you just want to use the model, go no further than Sheet 2.
Only look at other sheets if you want to understand how it works.
For examples, I will use the default settings in the original file, i.e. an affluent couple living in a large semi-detached house that they own in a nice neighbourhood in North-East London suburbs.
Current tax bill
2. On Sheet 2, the user provides demographic information about the household:
a) household earnings (C36 and C37)
b) whether the home is owned or rented (C38)
c) Post Code (C39)
d) type of dwelling (C40, chosen from the options provided in C44-52)
On the basis of this, the model estimates how much overall tax you are paying at the moment between “Direct Taxes” (Income Tax plus Employee’s National Insurance Contributions, C7-C14), “Indirect Taxes” (VAT[1] plus Employer’s NICs, C17+C24) and “Taxes on residential land and buildings and on transactions/wealth” (Council Tax, Stamp Duty, Capital Gains Tax, Inheritance Tax and some other small ones, B6-B18 on Sheet 4)
Example: our default household earns £124,000 p.a. and pays a total of £72,565 (58%) out in taxes. This breaks down between:
Direct taxes £32,471+ 8,113 = 40,584
Indirect taxes £20,301+ 6,973 = 27,274
Taxes on residential land/buildings and on transactions/wealth 4,708
___________________________
72,565
Tax bill after LVT implementation
3. The model automatically abolishes all current “Taxes on residential land and buildings and on transactions/wealth”.
4. The user can then fiddle about with the rates of:
a) Income Tax: Basic Rate, Higher Rate and a couple of other adjustments
b) NICs:
i) Employee’s (E13-E14)
ii) Employer’s (E17)
iii) Self-employed (E20-E21)
c) VAT (E24)
d) Corporation Tax (E26)
5. The model calculates how the changes in #3 and #4 will affect the household’s Direct (H36-H37) and Indirect (I36-I37) tax bills.
6. It then calculates how much Treasury revenue will be lost by the changes in #3 and #4 and therefore what level of national LVT would be required to plug the gap.
7. Finally, knowing the national LVT rate required, it calculates—again on the basis of your demographic data—how much LVT your household will be paying (J40).
8. This is added to your tax bill to spit out how much the household will be paying after LVT has been introduced to replace the taxes in the way that you have chosen (J42).
The default household chose to leave Income Tax as it is, reduce NICs across the board, reduce Basic Rate VAT from 20% down to 10% and leave Corporation Tax at 20% (ha ha!).
Their overall annual tax bill goes down from £72,565 to £61,261.
Site Premiums Map.
The map below gives the site premium for each post code district in England and Wales. This is the rough location value for an average three bedroom house in that area.
Areas in red are those for which no data is available and those in black have a site premium of above £50,000.
Click on any area to find its site premium and other data.
[1] Assuming that 50% of gross earnings will be spent on things that are subject to VAT