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?

Well why not have higher childcare allowances which can be applied to different childcare? Better that then claim for the full costs of a nanny which for some, many, is not an option.

And I'm a higher rate taxpayer too.

Nanny or not is a red herring. A business owner can offset a commercial service (eg van repair) same as an employee. Write your childcare costs on the form, provide paperwork with invoices and details of the provider. HMRC can apply an upper cap - but hopefully something less derisive than £5. Simples.

Those talking about double taxation have missed the point completely. This isn't a tax on the earned income forming a deposit and repayments, this would be a tax on the profit made from a rising market.

To buy your next house, you'd have everything you'd worked for and 72% of the unearned amount (on current rates - sickoffrozen yes I'd prefer 40% as most capital gains are earned by higher rate taxpayers but that's another thread). This is a far better position than that of a first-time buyer or someone who bought unluckily.

The tax would be likely to cool the property market which would be a good thing.

This tax would raise vastly more than stamp duty, so if you wanted to lessen the impact, you could abolish that if you wanted to encourage mobility.

Whois - how would you raise £1trillion?

I don't think that CGT on primary residences would ever happen in this country until the vast majority of the voting demographic are in rented accommodation. It just won't happen. I don't disagree with the idea totally, but it would be political suicide for any government that tried it. I agree also that people would be deterred from selling and would just extend their existing house. There would have to be exemptions for people who needed to move for work, up size for family, etc. I can't see it ever flying myself.

ihategeorgie why do you foresee these problems? As handsoff says - the tax would only be a haircut on the rise in value. I don't think it would stifle the market - reducing the 'profit' from selling a flat would dampen the price of the next rung property (say - a 3 bed terraced house). However, having less of a price jump to upgrade your house would make it easier for people to move to a bigger place.

Yes, but the house you're going to buy is still going to have increased proportionally more than the house you are selling because it was more expensive to start with. It will actually hit people further down the chain harder than further up. If we want to reduce the cost of housing, which I think most of us agree is ridiculously expensive, we need to disincentivise property speculation and increase tax on investors somehow. I'm sure they'll be a few BTL landlords along in a minute to tell me they are a business providing a service and they pay all their tax, but to me, it is speculation that has caused the problems we now have, not to mention high rents.

Are you on crack?

Was that to me? Biscoff

Also, you'd have to allow for general inflation to be knocked off the gain.

It might help lower house prices, but it would more likely encourage people to keep their first home as a buy to let and there'd be less and less 'starter' homes available for first time buyers.

YANBU - I've long thought CGT should be payable on house sale profits. As you say, this profit has NOT been taxed previously. A person buys a house for £200k, sells it 5 years later for £280k. In what way has the £80k been taxed before? The £200k may have been (or at least the deposit plus any mortgage repayments) but the £80k hasn't.

The £80k is totally unearned income. It's bizarre that we tax earned income that people work hard for, and we don't tax this profit which is totally unearned and depends purely on whether you bought in the right place at the right time.

So, I agree with you OP. But instead of paying off national debt, I'd use the proceeds to reduce other taxes - eg abolish stamp duty, reduce VAT or reduce income tax.

No the OP

Sorry Biscoff

Also, how would you stop people from selling to a friend or family member for a reduced price, but in exchange for something else? Not sure this would be wide spread, but it might happen.

The thing is, rich, clever and savvy people will always find a way round it if they want to.

But you already get a childcare allowance via vouchers. You don't need to offset the cost of a nanny too.

It wouldn't be easy to avoid - prices paid are on the land registry.

Linked transactions are something HMRC already allow for so this could easily continue.

Even if you sell to family for a reduced price, all you've done is passed the tax owed onto the family member. If the house was worth 200k when you bought it, would be 400k now and you sell it to your son for 200k, when he comes to sell for 440k he will owe 240k CGT rate rather than 40k CGT rate.

Ihategeorge - I don't agree with the impact being lower down the scale. First time buyers would have nothing to pay (in fact if you used this to find the removal of stamp duty).

As the next house up will have increased proportionally more the CGT owed will be higher the higher up you go.

The biggest losers in this would be those moving out of a big house in London / Home Counties to a much smaller property. Without this tax they could take ther hundreds of thjousands millions of unearned property price rises completely untaxed. This would ensure the treasury takes something - not as much as we pay on earned income but still a useful amount

Are homeowners also allowed to write off their losses under your scheme?

This sounds like a envy / jealousy tax to me. Building more affordable houses would be a better way to solve the housing market problems. Unfortunately any suggestion of this brings out the NIMBYs so no large scale development ever gets done where it is actually needed.

You're actually taking perfect sense, Handsoff, but don't expect most people here to see it that way. People (ie home owners) have been brainwashed by the Daily Mail to think that any appreciation in house prices are down to their investing genius and/or superb judgment in building that lean-to or getting new double-glazing. God forbid it could be a result of a market bubble that's been deliberately inflated by successive governments strangling supply.

This would raise cash, mitigate obscene gains in unearned wealth, AND it would suppress house prices in the longer-term. A win for everybody. Oh, except the greedy!

...sorry, that should say, 'except the greedy and entitled'!

Lovely boots, yes it would be as per all CGT so they could offset losses against any other CGT gains.

In reality there would be very few cases where this would happen.

Biscoff, no I'm not on crack - do you have anything to contribute to the discussion?

I'm a home owner. I'm not adverse to CGT on principal private residences. I'd insist on the following though:

No schemes to allow avoidance (by anyone i.e. the propoerty is owned by a company and the company changes ownership, not the property)

No transferrable relief (i.e. Mr. and Mrs. Jones and their 6 children all own the property jointly and each apply their allowance)

Allow for inflation (RPI or CPI)

Allow for capital expenditure (where this can be proved - this would have the added benefit of stopping tradesmen doing work cash in hand)

Allow for taper relief (at a modest rate).

If they did that, then I'd be on board.

What about people selling their homes to fund a care home- something that's going to become more and more common in the future - if you tax the proceeds, the gov will just end up paying out when the money runs out a lot sooner