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…….. “

People will refuse to downsize even more.

I somehow doubt it. If anything there will be a rush to downsize before it takes effect, that would be a good thing it should bring prices down a bit.

Hopefully it crashes the market back down to normal levels

Of course there won't. This assumption completely ignores the fact that it takes months and months to sell a home - particularly a high value one. Unless the changes are pushed way into the future then people won't have time to do this. In any event, not everyone is ready to move yet - the only ones who would rush would be those who are thinking of moving anyway. If this sort of change comes in it will come in very quickly.

Ah - so all becomes clear lifeofashowgirl is hoping for a property crash so that she can join the capitalist bourgeoisie

The market won't crash. The demand is too high. It will flat line at certain tiers of the housing market but it won't crash. In other points of the market demand will be driven higher and this will disadvantage anyone who isn't a cash buyer - mainly families. It will be even harder for them to find affordable properties. This isn't people on a household income of £300,000 and feeling hard done by (for anyone wondering).

The idea that the market will crash is dumb and silly.

Thing is though… taxing the people who own these homes won’t actually improve the house situation for everyone else.

To do that we need to build more homes.

TBH I think most pensioners have no interest in downsizing anyway - so these properties will be taxed eventually anyway, at the 40% IHT rate over the exemption vs 24% capital gains on the growth. So the whole thing might be a bit of a red herring.

So I wonder what exactly they think it will raise vs the IHT taxation route.

Of course they will. Any transaction already in progress would have to be exempt. And it only takes months and months because solicitors move at the speed of a sloth. It never used to take so long.

Older people aren’t refusing to downsize for the sake of it. It often doesn’t make financial sense. By the time they’ve paid estate agent and legal fees, stamp duty and redecoration etc, there would often be little equity released.

No she wants to find her ‘forever home’ that she can treat like an actual home - not an investment and wants to stay in it until she’s old and …. oh wait 🤔

No. I hope that the market evens out so that the under 40s can have some quality of life at some point.

I don’t think that’s true. Financially it would make complete sense for us. The thing that stops us is the dearth of suitable property. There are virtually no bungalows where we live and, even if purpose built flats weren’t the latest 21st century rip off, we don’t want to live in a geriatric ghetto.

Old people often don’t have the health to actively downsize. It’s one of the most stressful things you can do as a fit person let alone when you are feeling weaker and less resilient. That house will also have a wealth of memories attached to it in some cases. The lines on the wall as the kids grew, the pets buried in the back garden. I don’t think many elderly people are deciding not to move because it doesn’t make financial sense or they are trying to screw over some more young people. They are just getting through the next day and then the next.

Of course you do. Mumsnet is nothing but altruistic at all times.

It is generally the searches etc that take a long time on a residential property transaction. Even if it was just solicitors going slowly (it isn't) this isn't going to change in the next few months to enable people to push through thousands of new sales.

Those who were thinking of moving anyway might now be given the nudge to do it if they're already in a position to act quickly and if the implementation is delayed. Most won't be.

Anyway this is all hypothetical since it's just an idea being mooted, not something that is actually coming in.

It’s absolutely solicitors moving slowly. If not, why is it that a house sale only took about three or four months 20 years ago? We bought this house in 1999, we offered in April and moved in at the end of July - and that was in a red hot market.

But this proposal won't change any of that.

And presumably you have stairs at the moment - so if you wanted to you could move into a smaller property with stairs.

Getting rid of stairs would be the sole reason for moving! Just because we can climb them now doesn’t mean we always will.

Its chains and its increased involvement of mortgage lenders and surveyors and its changes in the ways searches etc are done and its the fact that conveyancing now makes hardly any money and so solicitors have to have many more files going on any any one time. Back in the day as a trainee solicitor I was sent down to the council office to do the searches. I would take a small file from department to department and wait 15 minutes for them to get the information for me and then I'd walk back to the office.

But I thought you wanted to free up your big home and not hoard it. You could move into a smaller house with stairs now and then wait for a bungalow.

Back in the day as a trainee solicitor I was sent down to the council office to do the searches. I would take a small file from department to department and wait 15 minutes for them to get the information for me and then I'd walk back to the office.

So it should be quicker then. Everything’s online now. You’re just making excuses. The market was red hot in 1999, solicitors must have been rushed off their feet.

also increased rules around building regs and planning and insurance/indemnity insurance and the fact that you cant even view a house until you can show the estate agent that yours has sold which massively drags out the process and all sorts of other changes

Why? What sane person would do that? You’re being ridiculous now.

Why would you not do that if you want to free up your property? Because it would cost you extra money?

See. It all comes down to people saying "great plan because it won't affect me!". As soon as you could improve some of these apparent societal problems at a financial cost to you it's suddenly not possible.

Im not making excuses. Im not a property lawyer. It takes time because there are multiple parties involved now and solicitors are dealing with multiple files. Being a solicitor is not a relaxing laid back job I can assure you.

It isn't the solicitors who do the searches its the council. They send off the forms and the councils take weeks and weeks to come back with the answers

Of course, the great British public just wants everyone else to pay, the „rich“, the „immigrant“, the old, the disabled, the unemployed etc etc

A fair tax system treats individuals like companies. Takes account of a whole households wealth including pensions, value of real estate, investments, savings and also all of their income minus debt and dependents.
We don’t have a fair system at all. Politicians aren’t revenue raising, they are point scoring and dividing because the system is rotten.
And sadly many in our population don’t have the skills to submit a full tax form including all of the above.

The most important thing in the property market is to stop foreign investors being able to buy in at a cheap pound and benefit. If CGT is going to apply only to U.K. taxpayers it will be another complete farce like stamp duty on U.K. shares but not foreign ones.