To think removing the CGT exemption for own homes would be the fairest way to solve government debt problem?

[Handsoff7]

UK housing Wealth was estimated at £5.2 trillion in January.

This is up £1.6trillion since 2003

savills

Based on market movements it should have reached at least £5.6 trillion by now.

Some big rises happened pre 2003 as well so I would estimate that there is between £2-£3trillion of unearned, untaxed wealth.

If we applied CGT to this, it could raise hundreds of billions for the treasury. Taxed at 40% we could nearly eliminate the national debt (very gradually as houses were sold).

Even at the lower end it would raise more than any other tax measure you can think of.

It would also be much more fair than a mansion tax or hike in income tax as it would only tax the increases in value - the 100k "earned" for being at the right place at the right time.

AIBU?

YABU, why should people be taxed twice? like everything else it would only effect ordinary people anyway, the mega rich would find a way to avoid it. I think we should sort out the tax avoidance of the mega rich.

Yabu

When people sell their home it is usually to buy a new one.

They then pay stamp duty on the purchase. Cgt would be a double whammy. Stamp duty is already a tax on mobility as it is.

If they want to reduce the debt, they need to simplify welfare (ditch tax credits and whack up the personal allowances), incentive business to pay higher wages through NI breaks = more spending, more indirect tax revenues and less reliance on welfare and tweak the higher tax rates.

Basically the government needs to sort out the biggest vampire on its coffers = businesses who pay low wages (hence needing benefits), who don't provide pensions (hence the massive state pension bill) and sort out housing so people don't need to claim housing benefit.

Yes, for most people they don't see the £100k earned, it just into their next house. Taxing it would mean that they either couldn't buy their next house or the market crashes as people cannot afford to buy. People would stay put, there would be no movement, e.g. to take up a new job and the market (not just the housing market stagnates). If the house is a second home, BTL or sold as a result of the death of the owner the gain is subject to CGT or IHT.

Iggly for PM.

It's not that simple though. A house may have a nominal "value" which has gone up by £100k but the people need to live in the house and are unlikely to have any means to pay any CGT on the unearned income. When they sell the house they still need a house to live in and the house they are buying will have gone up in price too so they can't usually release any capital for the purpose of paying any CGT.

You could theoretically apply CGT to any capital released from the equity of a house through refinancing and any "change" leftover when someone downsizes or trades in from an expensive area to a cheap area. If you move from a £750k house in London which you bought 25 years ago for £180k to a £250k perfectly decent house of the same size in a city further away from London, I see no reason why the £500k of unearned capital released shouldn't be subject to CGT.

BUT if you are moving from a £750k house in London which you bought 25 years ago for £180k to another £750k house in a different part of London which you need to move to for practical reasons, then that "unearned" value is entirely theoretical and inaccessible and should not be subject to tax.

I think inheritance tax captures some of what you are trying to achieve already, and only on larger estates.

Tax legislation allows reliefs where you have made profit on an asset where those profits are invested fully into another asset.

So if you are moving up the ladder, there'd be no tax to pay as all of the profit was reinvested in a more expensive asset. It would be when you downsize or die (IHT already) that taxation would occur. You couldn't have double taxation of IHT and PPOR tax at the same time.

How are you supposed to afford your new house, which has also gone up in value? And then pay stamp duty on it too? Yabu.

But it doesn't. It encourages older people to realise gains from their property to spend on nice lifestyle, and makes flipping houses a worthwhile occupation - while people starting out on the housing ladder face a massive gap between incomes and affordability.

And if double taxation is such a no-no - why do I pay my nanny's tax out of my post tax income?

Or VAT or council tax come to that Party. It's all double taxation.

Ah - but if I ran a small shop, I would be taxed on my income net of my business expenses (specifically HMRC would deduct the cost of paying people to work in my shop from my gross wage before figuring out my tax liability). Then I have a fair income which I spend like every other citizen on Costa Coffee and iPads (my food is VAT free as a necessity). How is employing a (nanny) assistant to enable you to attend fully to your work substantively different to employing someone to stack shelves to enable you to attend fully to serving your customers?

Business expenses for tax are wholly, exclusive and necessary. You don't need a nanny. Plus you are not a business when employing a nanny. Plus you get some childcare vouchers before tax which isn't double taxation.

@ PM. No way, I'd have to work with MPs

Not to mention the one I hate Iggly . You'd have to work alongside him!

Of course I need childcare to work!

And plenty of people in my field work as 'one man consultancy businesses'.

And childcare vouchers depend on your employer - why not a universal childcare tax rebate?

But it doesn't. It encourages older people to realise gains from their property to spend on nice lifestyle, and makes flipping houses a worthwhile occupation - while people starting out on the housing ladder face a massive gap between incomes and affordability.

Yes, yes, those evil old bastards who've worked like dogs and saved and scrimped for years, on comparatively little opportunity, not having the benefit of extended education, cheap designer goods, cheap travel yadda, yadda Why on earth shouldn't they have a nice life?

Aren't you also asking if you Abu to raise CGT rates to 40% from their current 18% and 28% levels?

You are being ridiculous.

Well - the discussion is not about the portion of the value of their home they've paid for. The discussion is about the £X00,000 whacking great big house value rise - which is unearned - and also benefits people in proportion to how wealthy they already are. So if you worked like a dog on a low wage which you spent putting your son through college - no windfall. If you worked like a dog for a high wage and spent it on a Surrey detached house - a windfall of literally millions. This unearned windfall is then directly 'invoiced' to people lower down the housing chain (who are probably also working like dogs - and need the money to clothe their children rather than to cruise).

Very good idea, house prices would gradually fall relative to incomes as property would stop being a more attractive investment than anything else, and people would have to think of buying a home not an investment. I think I would defer capital gains on a home which was sold to buy an equivalent/ greater value size home though, and clobber people at the point when they release equity. And stop all the various CGT reliefs that apply on second homes/ rental homes etc etc.
I also think any property which is left empty for more than 3 months should be automatically requisitioned for use by a housing association.

You don't need a nanny.

Any childcare will do (e.g. you could have a cm or nursery or nanny before school age) hence tax free childcare vouchers -which is actually a tax free allowance. It just depends on whether your employers can be arsed to administer it or not. They're relatively cheap to run.

So, you already get "tax free" or "before tax" childcare contributions.

Nick Clegg is talking about increasing the higher rate for CGT, not that he'll get another whiff of being in government but here's the article:

www.theguardian.com/politics/2014/oct/07/nick-clegg-lib-dems-capital-gains-tax

A nanny is the cheapest option for 3DC - and childcare vouchers never covered the full bill. And - iirc - the original tax break on them is no longer in place.

I found them vaguely shady with all the different (private) providers (Care4, Accor.. There were more..) and your employer needing to administrate. How is that a simpler solution versus declaring your affiliation to a registered childcarer to HMRC, providing copies of invoices, and offsetting the cost on your own tax return?

How is that contentious - when withdrawing £100k tax free unearned income from the rise in value of your house isn't? £100K no strings attached - no obligation to use it to secure your own future housing or care.

As a higher rate tax payer I can have tax relief on up to £28 per week childcare.

£28 per week?? Per week??

I'm still ROFL laughing.

So actually I shouldn't be sore at paying tax for my work essential childcare - because I am being allowed £5.60 a day tax free childcare allowance.

DS breakfast club costs more than that - let alone proper childcare for 2 or more preschoolers.

This is a terrible idea, but we already have plenty of double taxation eg inheritance tax and CGT.

The most useful thing out tutor said to me before our tax exams was "it's not logical, and it's not fair. If you find yourself thinking 'this can't be right, I've already taxed this' then STOP thinking that because you probably are right to tax it twice!"