Would £10,000 help millennials get on the property ladder?
, by Matt Stevens
A 2018 study recommended providing individuals in Britain, starting at age 25, with a £10,000 Citizen’s Inheritance to address intergenerational financial inequality.
Overview of the study
The study, titled A New Generational Contract, was the result of a two-year analysis of the financial experiences and prospects of different British generations. It is the only comprehensive study to examine the inequality between younger generations (typically millennials born between 1981 and 1996) and older generations (typically baby boomers born between 1946 and 1965).
In addition to proposing a £10,000 Citizen’s Inheritance, the report suggested policies such as an NHS levy and broader reforms to the tax and pension systems.
The study recommended funding the Citizen’s Inheritance by overhauling the inheritance tax system. It proposed replacing it with a ‘lifetime receipts tax’ set at 20% on all gifts or inheritances up to £500,000, and 30% on amounts above that. This policy aims to redistribute wealth to younger people, alleviating financial pressures and bridging the gap between generations.
Potential impact and criticisms
The study’s recommendation is ambitious, but can it truly address the financial challenges faced by younger generations, particularly in the housing market?
A primary criticism of the proposal is the concern that the £10,000 might be misused. However, the report specified that the funds would be restricted for purposes such as securing a property, furthering education, or starting a business venture. The goal is to ensure that the Citizen’s Inheritance serves as an investment in the future rather than just a cash windfall.
Regarding the housing market, the report highlighted a significant disparity: millennials are half as likely to own a home by age 30 compared to baby boomers at the same age. The Citizen’s Inheritance aims to help more young people enter the housing market.
Nevertheless, while £10,000 could contribute to a deposit for a more affordable home outside major cities, it may have limited impact in high-cost areas. For example, the typical 20% deposit for a home in London exceeds £150,000, so £10,000 might not significantly alter the affordability equation in such high-priced markets.
Public opinion and conflicts
The idea of a Citizen’s Inheritance has been criticised by some as a gimmick (The Guardian), particularly in its ability to address housing issues for millennials. Critics argue that the proposal might merely be a superficial solution to deeper problems. With the high demand for property, increasing the supply of affordable homes could be a more effective way to help young people get on the property ladder than a one-time £10,000 payment.
Additionally, there are concerns about potential conflicts arising from such a payout. Matt Stevens, Director at The Mortgage Genie, commented: "The findings are likely to create a divide. A broad solution like this could exacerbate existing disparities. For example, a lower-paid baby-boomer might see part of their salary taxed and redistributed to a more affluent millennial, which may seem inequitable."
Stevens also pointed out that the current £3,000 annual gift allowance already enables many parents and family members to assist younger generations with deposits without incurring Inheritance Tax. Under the proposed changes, those who have previously contributed could face additional costs due to the introduction of a lifetime receipts tax. Stevens suggests that addressing the root causes of these issues would be more effective than implementing age-based financial measures.
Conclusion
It remains uncertain whether these proposals will be adopted by the government. Nonetheless, one positive outcome is that the discussion has highlighted the challenging realities faced by first-time buyers saving for a deposit. This increased awareness could lead to meaningful change.
If you’re looking to get onto the property ladder and need guidance, our guide to saving for a house deposit is a valuable resource, and we also offer mortgage advice for first-time buyers. Feel free to get in touch for personalised assistance by calling 01915809890 today.
Please note that by clicking the link above, you will leave the Mortgage Genie website. Neither Mortgage Genie Ltd nor PRIMIS Mortgage Network is responsible for the accuracy of the information on the linked site.
