Reeves plots new capital gains tax on expensive homes

Telegraph

2 days ago

Owners of expensive homes could be hit with capital gains tax when they sell their properties under plans reportedly being drawn up by Rachel Reeves.
The Chancellor is said to be considering ending private residence relief, which exempts people from capital gains tax when they sell their primary home, for properties above a certain value.
Higher rate taxpayers would pay 24 per cent of the value of any gain they make while basic rate taxpayers would have to pay 18 per cent, according to The Times.
It comes after The Telegraph reported on Monday that Ms Reeves is drawing up plans for a fresh raid on homeowners, with annual levies and a mansion tax being pushed forward as options by Treasury officials.
The plans have echoes of a mansion tax proposed by Ed Miliband when he was Labour leader, which proposed an annual charge on expensive homes.
The Chancellor is scrambling to fill a black hole of up to £50 billion in the public finances caused by welfare U-turns and slower than expected economic growth.
Labour pledged not to raise income tax, national insurance or VAT in its manifesto, which means it is looking at property taxes as an alternative.
A property value threshold of £1.5 million for any new levy would affect around 120,000 homeowners who would be hit with a bill of almost £200,000 if they try to move.
Property experts warned the Chancellor any such levy would undermine her attempts to boost economic growth as it would jam up the housing market by stopping people moving. Older people downsizing could also be badly hit.
Aneisha Beveridge, head of research at the estate agent Hamptons, told The Times: 'It's a big change that would hit long-term owners hardest and create a cliff-edge at £1.5 million, 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.'
It comes after The Guardian reported stamp duty could be replaced with a levy on the sale of homes worth more than £500,000.
Those proposals were inspired by a report from the think tank Onward, which backed an annual rate of 0.54 per cent for properties worth between £500,000 and £1 million, and 0.81 per cent one on values above that, to be paid when a property is sold.
A Treasury spokesperson said the department does not comment on future tax changes.
They added: 'We are committed to keeping taxes for working people as low as possible, which is why at last Autumn's Budget, we protected working people's payslips and kept our promise not to raise the basic, higher or additional rates of Income Tax, employee National Insurance, or VAT.'