Rachel Reeves considering charging CGT on sale of main residence?

Would this tax make people less prepared to invest in upcoming areas

Hell, no. Like many up-and-coming young people of the 1980s, I made loadsamoney by buying sad London properties in 'gritty' areas with good transport links and improving them. Other people were doing the same, so the areas got gentrified/yuppified to meet the needs of people like us.

Not everyone wants to take that risk or do that work. The more cautious buyers with more money to spend bought from us - we had, collectively, turned the areas into places that would serve their needs immediately. We moved on to other sad properties, one or two stops along the line, and did it again.

This is the story with any investment. There are those who accept bigger risks for better potential returns, and those who can afford to accept less dramatic yields with slower, more reliable growth.

If you're interested, I pushed my luck in the end and went bust. I was over-extended, prices were stagnant and I couldn't weather it out because everything else in my life had gone wrong. Such is the danger of putting your all into a single, highly leveraged investment. I own nothing - and it's given me a strongly pragmatic overview.

My pension was embezzled (twice), as well. The more sensible thing is to invest across a range of vehicles, not just your home and not entrusting your future to a single management entity. You will find that the beautiful young people who bought our beautifully-renovated homes in our delightfully up-marketed areas (courtesy of their fathers, no doubt) also have a financial portfolio. Capital is capital, whether you live in it or not.

If I could advise my 24-year-old self, she wouldn't listen anyway! I'd be suggesting she buy an equally sad flat four stops further out of town, do the work, and wait. I'd say that, having a now much smaller mortgage to keep up (I was on 13.9% interest then, every thousand mattered), she should pay the difference into at least two separate managed funds ... and wait. Life would've been somewhat less exciting, but I'd have ended up well cushioned against reversals. And well placed to meet any taxes due.

This is just the first comparison chart I found. There would be better ones. Bear in mind you don't take out an enormous fucking loan to buy shares, you just pay in monthly and your investment quietly grows. Your payments are all investment, not interest.

I dont know how I feel about this.

On one hand capital gains makes sense. It is a capital gain.

But on the other hand, my property partly gained value because I put blood sweat and tears and money into renovating it. Would there be a way of calculating that and removing from the gain. It wasnt like a static lump that just sat there and increased in value. (Although some of the increase is just market forces)

I also think i helped improve the local schools as it happens. I volunteered, worked and sent my children to them, even when they were special measures and people were moving away. The schools aee now good and the area more popular

Would this tax make people less prepared to invest in upcoming areas as they would presumably pay more tax when they sell than if they bought in an area already good but making less gains. (Or would market force sort that out too)

Im interested in unintended consequences of things like this.

Which yes could be a way forward when everyone has had the benefit of employer contribution pensions in their working lives
As it stands
That’s not the current case
Put that along side crashes in the markets and people losing all of their pensions many people rely on downsizing to free up enough to live on in their old sge

Some bought a rental to pay for their retirement but when mortgage interest could no longer be offset as a cost that no longer became affordable. So they had to sell up.

so for many people in their 50s plus downsizing and releasing money to live off in old age is the only way forward

If cgtax is introduced many will not be able to do that.
So at the moment many people will be plunged into pension poverty with this policy

Younger people with the benefit of employer contributions to pensions ( for some not much but more than nothing ) will be able to weather the storm and won’t be relying so heavily on downsizing. At the very least they’ll have the benefit of time to plan

It's weird, though, that we don't experience the profits from our homes as capital gains. They absolutely are - we even talk about buying property as an investment, don't we? During times of property inflation, we all sit around with our mortgaged pals comparing the £££ we've made just by having somewhere to live and a gigantic loan.

It's more rational to tax it as capital gains. The market would adjust, of course, because you can only sell anything at the price buyers will pay. Your up/down sizing plans will still be reasonable, just the amounts will be smaller.

You don’t pay stamp duty when you sell. It’s when you buy! A selling tax or annual tax is new. Council tax is for local services not the government’s coffers!

But there are various ideas in the papers

• and one of them is the % paid every year instead of a one off Stamp duty payment paid by the buyer.

• This thread is about another new idea of paying a lump sum cgtax on private residence. That’s the one you pay when you sell.

These are not being sited as either or but aswell as

So two seperate taxes

The idea being floated is you pay an amount every year
as a % of the sale price. We’ve seen figures of around 0.54%
Then you also pay council tax.

I just looked it up. There’s two parts - a sellers one off tax to replace stamp duty, the other is a replacement for council tax. So again, not a new tax, but a replacement tax.

I thought you just paid it when you sold the house?

Hardly cost effective

They pay for life though. So it’s not stamp. It’s a property tax

@strawberrybubblegum ,

‘We pay far, far more than our fair share.’

On what basis do you make that statement? Fair is such a subjective word.

That wasn’t really a “new” property tax, it was changing the way stamp duty is done. So instead of the buyer paying it, the seller pays it in houses over £500k

This is exactly why ill thought out tax changes often do more harm than good and bring in less tax revenue than expected. No one seems capable of looking at the bigger picture and the entirely foreseeable consequences of poor tax policy.

It's actually quite freeing. As all the incentives to do the 'sensible' thing are taken away, I can make choices which are riskier but maybe more fun.

Coming back to CGT on main residence - but only for middle class people in London and the SE (at least until inflation catches up in a decade or so, at which point it will also bite middle class people throughout the country as well as working class people in London and the SE).

I do wonder whether Labour have thought through the consequences for professional flight, or brain drain? A really high percentage of London professionals - in shortage industries, who won't be replaced - have links to EU countries, and have chosen to live in London for a while because they like it. Maybe one spouse is English, and the balance has fallen in the UK's favour for bringing up kids - but that does get re-evaluated at different education points. The choice is often quite finely balanced. CGT exemption on main residence is quite significant: it's a barrier to trying out living elsewhere, since that changes your exemption.

I'm finding comments on higher earners "paying their fair share" increasingly galling.

We pay far, far more than our fair share.

Totally agree

This country is bitter towards both real and perceived wealth and it’s sickening listening and reading of it.
If we want to grow the economy we must invest in it and encourage a work incentive to better oneself.

Growth is the only way out. Not stealing ever more from a dwindling number of suckers who are still willing to work hard.

Agree on fairness in terms of wealth but not taxes on a home. People simply can’t pay higher taxes just because they live in a more expensive property and should not be forced out of their home to do so.
When they die their assets are taxed so the Govn get some money in the end anyway
and when they are alive they’re current ( all be it out of date) council tax system charges based on property value also.

In terms of income tax I don’t believe there should be cliff edges. Countries with one income tax across the board with no or only tiny tax free amounts are fairer imo. Everyone pays the same and we don’t get people cutting down on work and one section of society bitter towards another and struggling in the middle.

This country is bitter towards both real and perceived wealth and it’s sickening listening and reading of it.
If we want to grow the economy we must invest in it and encourage a work incentive to better oneself.

So I believe in everyone being treated the same and not a sliding scale of the so called well deserved
We might all actually stop whinging about each other then aswell

cgtax on a home would only be relevant if you sell it
So People won’t if they are going to pay out louds then louds again on death

They'll sit tight and pay it all on death alone

“A pension is mainly invested in equity, which helps the country to grow and GDP.”

Except the investment in British equity and companies has taken a nose dive in favour of overseas equity (which often does not even attract stamp duty) and speculative gain. So often it has not been benefitting our economy, but has been eg benefitting the US economy.

“So then rich and poor alike should pay the same % on all assets”

No taxation should be progressive. But someone equally rich to someone else, taking into account all assets classes, should be paying the same otherwise you get anomalies and disincentives in the system.
Progressive again to the extent that it does not cause generational conflict either. Don’t shoot the messenger. We are coming to the era of Millenials being in charge and this is all going to change as it is not sustainable long term. So one can surely agree on the principle of fairness between two people of equal wealth and income overall of the same age.

Well you stop paying NI when you reach state pension age.

Nobody can claim someone with a 1 million pension pot is poor. I am just saying a 65 year old with a 1 million pension pot versus a 65 year old with a 1 million house who will only be getting the state pension should be treated equally for tax purposes. So allow the contribution of housing wealth into pension pots, for example, if they want to introduce CGT on main residences.

If you move your pension abroad it is all incredibly complicated, subject to double taxation agreements etc. There are already 1 million British pensioners taking state pension abroad. Some are getting triple lock others are not.

So then rich and poor alike should pay the same % on all assets

Thanks Blossom of course it doesn't
For a start
those starting out today get the benefit of employer contributions to pensions
That was only compulsory from 2018

Most of us were putting in a minimum of 2% just to pay for the management fees of a pension alone
If there was an employers pension one employer wouldn't take on another’s
So you moved jobs or lost it because you had the audacity to have a baby and you had to start a new pension and the other one got shelved losing 2% every year in management fees till it ran down to zero
I lost 2 pensions like this

So
Think again who ever spouts we had it better