Rachel Reeves considering charging CGT on sale of main residence?

[Another76543]

It’s being reported today that Reeves’ latest idea is to tax homeowners on the capital gain made on the sale of their homes, where that home is above a certain value. From The Independent

“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…….. “

I’m not entirely against it tbh. I suspect rich people will set up limited companies and dodge paying stamp duty and qualify for tax relief at sale. I It’s possibly just jealousy as my house hasn’t increased much in the last 12 years!

It seems to me that she’s just scrabbling around for ideas because of their ridiculous manifesto pledge not to raise income tax etc. Raising the basic rate of income tax and VAT by 1% would have raised billions, but her hands are now tied. Instead, they are trying to get a small percentage of the population to pay more. Those people are often those who could easily move abroad. She is driving wealth and wealth creators away.

I read it was being looked at for the sale of houses valued over £1.5bn so I think I can rest easy!
Lots of right-wing newspapers are trying to whip up a frenzy against Labour by speculating over multiple taxes that may or may not appear in the Autumn budget, without much substance it would appear.

I think the threshold is intended to be above 1.5 million! So really it will affect those rather comfortably off of it came into effect.

its kite flying too - see how much protest there is on the idea at all

Trouble is the "black hole" is here and now, but all these "punish the rich" taxes will take years to bring in revenue. This proposal will only affect those selling houses in future years, not today, and will "spread" the revenue over decades to come. IF it works, then it will help the deficit over the long term, but it will do beggar all for today's deficit, next year's deficit etc.

She should just take a hit and increase income tax and VAT by 1% which will bring in billions from day 1. Yes, it wasn't in the manifesto, but it needs doing. And let's face it, Labour are toast anyway and havn't a hope of winning the next GE, so I don't know why they're so bothered about what the electorate thinks.

To be honest, I think it's more of a "punish the rich" tax to keep their socialist/union backers happy rather than actually trying to plug the black hole.

I think your £1.5 million figure @bombastix sounds more likely than £1.5bn 😄 But either way it's high. Even if people do leave the UK they'd still have to pay capital gains when selling their UK property.

As someone with a house worth over that amount it would probably stop us downsizing. There's a good article in today's Spectator

I’m not sure The Independent is knows as being a “right wing newspaper”! If anything, it’s viewed as more left leaning.

The £1.5m is a guess by the media. It’s being reported that “The threshold is said to still be under consideration, but a £1.5 million starting point would hit around 120,000 homeowners”.

Yesterday, there were reports that a new property tax might hit homes over £500k.

All this is speculation, of course, but it’s clear that she needs to increase the tax take some how.

“She should just take a hit and increase income tax and VAT by 1% which will bring in billions from day 1”

That’s exactly what she should have done, rather than trying to go after those she views as better off. Trying to raise taxes on a small minority will never raise very much.

@SweetPenelope yes and this would create an issue. I can't see this policy coming in, it's just speculation.

They wouldn’t have to pay it if they sold up before the tax was introduced.

I think it’s probably quite smart thinking - if people are put off they will sell now. If they hang on, the amount of tax goes up. If you hang on into retirement you either get hit with IHT on death assuming you don’t plan.

Reeves will be banking on there not being much sympathy for such a class of people.

There will be a lot of houses at £1.499 million then.

And who on earth is going to do the valuations? What if they value too high to get it higher than the threshold or surely houses at there or thereabouts that level will suddenly be sold for just under.

True, so depends how quickly they'd introduce it after announcement and how quickly a £1.5m+ house takes to sell.

It would be based on sale proceeds I would think. But yes, people will do the maths and adjust the price accordingly.

As others say - just put 1p in Income Tax. You are a shit Chancellor anyway and will be hopefully booted out during the next election.

I think it will work like the £100,000 income tax cliff edge. If the threshold is £1.5m, houses will be put on the market at £1.49m unless it is clearly likely to go for over £2m. There will be nothing at all between £1.5m and £1.75m.

If your house is over the threshold there would also be real advantages to selling in retirement rather than moving before - particularly if you are able to take early retirement and have minimal income (by living off savings so paying tax on interest only).

The price of houses in UK is just ridiculous. It does not match the average wage.
Somehow, they need to come down. So, if more taxes are to be paid, then the prices will have to stay low or the mortgage interest be adjusted.

I assume just under is probably how people will handle this but clearly you would calculate your possible liability. Otherwise it gets silly.

And downsizing for the elderly people wouldnt happen. It would cut the market dead. Stupid stupid women. Rather like hammering small business and hospitality. My hairdresser has been clobbered twice with NI and increase in NMW. He has put up his prices but eventually people just want pay.

LABOUR ARE MUCH MUCH WORSE WITH THE ECONOMY THAN ANYONE THOUGHT

That proposal is not going to be popular in lots of very strongly Labour voting areas of London, where £1.5m gets you a fairly standard Victorian terrace in a not particularly upmarket area, eg https://www.rightmove.co.uk/properties/162913910#/?channel=RES_BUY

Not exactly super-luxury homes for the mega-rich.

Yes but she’s not going to do that. So you are looking at these kinds of marginal taxes. Reeves doesn’t like well off people, she’s not going to start increasing income tax for everyone and particularly not now.

Idiotic Labour Party

https://www.spectator.co.uk/article/britain-is-paying-for-reevess-non-dom-tax-disaster/

Well it would help DH and I make the neverending decision whether to downsize or not 🤣
(Except our home isn't worth 1.5m so maybe not).

Yes and there is nothing wrong with this. They are clearly looking at different ways to change the tax system. Lots of ideas will be suggested by lots of people. It is the job of the civil service to go away and look at the practicalities of each. Some are bound to be unworkable and others may be useful ideas.

The problem is the newspapers don't report it as such. They report is as though Rachel Reeves has personally suggested every single idea and is about to implement it no matter how bonkers it is.