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…….. “

She is a politician and wants to survive. It looks like her own party will not tolerate cuts. The right wing already hate her guts; what’s in it for her to do something to please them and piss off lower to middle income workers? Nothing. If she touches income tax she will be cut to ribbons. CGT on million pound homes? Nothing like as bad.

She can piss off Spectator readers. Or farmers. Her party have made it very clear what she needs to do.

I don’t think she’s looking for a tax that’s fair, she’s looking for a tax that the backbenchers won’t rebel over.

There goes that strategy of using my home to downsize when the kids are gone and use the hard earned equity [by investing in improvements] as my pension plan.

Yes! She has no other option. The economic literacy is playing a distinct second to political literacy which she’s failed at for over a year.

I’m against anything that snarls up the housing market further. People need to be able to move for jobs and it shouldn’t be so hard for people to increase the size of their home when their family gets bigger and then downsize when their dc move out. It also makes divorce and separation much more of a pain. I live in a 5 bed and would like to downsize in a few years to help my dc buy homes of their own but if my equity is taken in tax I won’t have that incentive. For lots of people downsizing is part of their retirement budget and it’s unfair to allow people to build up equity during their working lives without them knowing it will be taxed to buggery once they try to release the equity. I’d rather an overhaul on council tax which would encourage downsizing and not punish people who need to relocate for work.

VAT on hospitality has played a huge part in the collapse of the hospitality sector over the last few years. The sector is a big employer so shouldn’t be shafted further imo.

@RavenPie

Your equity won't be taken in tax. CGT is on the "Gain" i.e. difference between purchase price and sale price, so it will be x% of that gain, not on equity.

Firstly, it will be a tax on London and a few more expensive places - not just the “posh” areas, but a Victorian terrace in zone 2 or 3.

Also, if you bought your house many years ago, it will stop you moving to a similar value house elsewhere, if you need to. Unless they value all potential houses in this category at the point it comes in, it will be a regressive tax. I bet they don’t adjust the purchase price for inflation.

In London and parts of the south, it is not a mansion tax, but an everyday family house tax. It will destroy the market for these houses and people will find themselves stuck in unsuitable houses.

Also, even if they allow people to offset the costs of improvements, people won’t necessarily have suitable records before it’s bought in.

i think it would be more fair to update council tax bands and tax locally - to be spent locally.

We have more net receivers than net contributors it is not a sustainable model.

Exactly this. It becomes even more unsustainable when those net contributors say “enough is enough” and leave. I’m certainly encouraging my children to look at careers, and possibly universities, abroad. We have already lived abroad during our careers and know that there are many countries who value and appreciate our efforts.

Which illustrates exactly how they do not actually want to improve the economy. The cynicism and dishonesty is exhausting

Equity is the amount you actually own, ie market value less borrowings.

As a simple example, assume that someone has a £1.5m house with £500k borrowings. They originally bought the house for £1m. Their current equity is £1m (£1.5m-£0.5m) which they can put towards another property. If CGT is introduced, they will have to pay CGT on the £0.5m gain, which could be around £120k. That £120k ends up being paid from the proceeds of sale (unless they have spare funds somewhere wise). This means that they’ll only have £880k to put towards another property (the £1m equity less the tax).

I think they're leaking/briefing each idea to see what gets the most positive reaction from backbenchers. They're really in charge of the country now.

So in just over a year, the 'black hole' Labour inherited has gone from £22bn to £40bn? And then because she won't deviate from self imposed rules, or make the hard decisions on welfare spending that are sorely needed, she's left casting about for increasingly desperate solutions?

Raise the basic rate band to £20k, the higher rate band to £65k and put a penny on income tax. It would raise a lot but at the same time not penalise lower earners.

cost of stamp duty reduces incentives to buy, this will reduce incentives to sell, and so we’ll have 4 years of people staying put and voting labour out next time…

we need long term reforms - council tax etc. not this kind of thing.

3 small businesses near me have closed in the last few weeks. We are left with the charity shops and the money launderers. Burglaries have increased rapidly in the same time period as have car thefts in broad daylight.

Yep!!

Yes.

Initially it was idle chat but we are also now seriously looking at emigrating in the next 3 years. Our income isnt setting the world alight (a bit of over £300k gross combined) but we are just over it. We did "everything right" and the social contract has not just been broken...it's been set alight and shat on.

We should live like kings... in reality we shop at aldi and have a 5 yr old polo, the kids clothes and most of ours are vinted and mortgage and child care cost us over 6.5k net (then there are bills and food and everything else on top) its almost 10k pm net to stand still

i am paying an effective 80 something % tax on a portion of my salary once lost childcare help is factored in.

we both believe in social provison but we are sick of feeling screwed at every turn... i really feel the drawbridges are being pulled up left right and centre (buy to lets, pensions, fuel allowance, huge house prices rises of the past.. the list goes on)

They are just scatter gunning.

When are they going to get the £60 million back from Michelle Mone?

Exactly the same for us.
Yesterday morning for the first time since moving to the UK 15y ago, DH said we should seriously discuss a potential move abroad.

What I don’t get: couldn’t they increase tax on alcohol, cigarettes, vapes, gambling, fizzy drinks, etc? Basically thing that are not necessities and that people would still use even if the cost increases by a few pounds. So small amount of tax x lots of people, instead of their current approach of high tax for a small pool of people.

This. If the higher rate of tax had kept in line with inflation, the threshold would be about £80k. Pesky fiscal drag. But hey ho, keep hammering the working middle.

This is a really good idea. The increase in the value of a house is the purest form of unearned income.

So you could make a massive gain on a property now worth £1.4m that doesn’t get taxed, and make a small gain on a property worth £1.5m and it gets taxed?

Only an idiot would base it on property value rather than size of gain.

It is but it doesn't mean you have the cash to pay the tax. Generally you want to use all the money to buy a new property.

And it's about motivation. You want your tax scheme to motivate people to work more, to spend their earnings in the local economy, move up and invest and generally boost the country's finances. Punitive taxes like this achieve the opposite.

Really?

Example
You are mids 40s...
You bought a in london for 1m in 2019
It's now worth £1.2m

You now have 2 kids and need to move to an equivalent home because jobs/ insane neighbours/ you need to care for parents/ whatever.

Your new home is also £1.2m

so not you need to find:
£63,750 stamp duty
£10,000 solicitors selling and buying fees and moving costs...
AND 48K cgt...

So 120K extra on your mortgage instead of the already outrageous £70k) for having the temerity to move... sounds great!!!!

The other reason its bullshit is we are just 15-20 years behind Japan so this isnt a cash cow long term.
Yet again the boomers who are cashing out now are getting the best of it... and those who stand to inherit generational wealth from boomers as they pass on.

Anyone who doesnt have wealthy relatives and just wants to live their lives and is under 50 just gets screwed...again.