Rachel Reeves considers ‘mansion tax' to fill Treasury black hole

Independent

16 hours ago

Rachel Reeves is considering hitting the owners of high-value properties with capital gains tax when they sell their homes as part of an attempt to fill a £40bn hole in the public purse.
The chancellor is said to be looking at ending the current exemption from capital gains tax for primary residences as she seeks ways to raise cash in the face of dire warnings about the state of the public finances – a move that would be seen as a 'mansion tax'.
Such a move would see higher-rate taxpayers pay 24 per cent of any gain in the value of their home, while basic rate taxpayers would be hit with an 18 per cent levy.
Sources told The Times that under proposals being considered for the autumn budget, the private residence relief would end for properties above a certain threshold.
The threshold is said to still be under consideration, but a £1.5 million starting point would hit around 120,000 homeowners who are higher-rate taxpayers with capital gains tax bills of £199,973.
Asked about the plans, Treasury minister Torsten Bell declined to rule it out, insisting any potential changes were matters for the chancellor and would be set out at a budget.
Asked to rule out hitting the owners of high-value properties with capital gains tax, the pensions minister told Sky News: 'Working people and people's living standards is what this government is all about.
'We've seen wages rise more in the first 10 months of this government than the first 10 years of the last Conservative government.
'But of course, as you know, questions for tax are for the budget and they're for chancellors.'
It comes amid concerns that ending primary residence relief could deter people from selling their homes, slow the housing market and could have a particular impact for older people looking to downsize.
Aneisha Beveridge, head of research at the estate agent Hamptons, said: 'It's a big change that would hit long-term owners hardest and create a cliff-edge at £1.5m, distorting behaviour around that point.
'While the headline gains look substantial, they're often the result of decades of ownership and, in some cases, house prices haven't even kept pace with inflation.
'For households who don't need to move, this could act as a strong disincentive to sell, dampening transactions and potentially weighing on house price growth and Treasury revenues alike.'
But there are growing questions over how the government will raise the money to fill the gap in the public finances, given Labour's manifesto pledge not to raise taxes on 'working people' leaves the chancellor with a limited number of workable options.
The scale of the challenge facing her in the autumn budget was illustrated by the NIESR economic think tank warning this month that Ms Reeves is set for a £41 billion shortfall on her self-imposed rule of balancing day-to-day spending with tax receipts in 2029-30.