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…….. “

You had to buy a house on a single income because only men’s wages counted. Building societies didn’t allow women’s incomes to be taken into account.

DH’s parents’ first family home (two bedroom basement flat in South Kensington, round the corner from NHM, bought in the late 60s) is almost certainly worth much more than £1m now. I don’t know exactly how much they paid for it, but given the average house price in London then was £4400 and this was only a flat, probably £2-3k.

Sadly they sold it in the 70s!

Except the income tax and NI they’ve paid on the money earned to pay for the extension, the VAT they pay on the cost of the building work, the higher council tax that eventually flows from a bigger property, the higher VAT take that comes from increased energy used by a larger property, the planning application fees necessary to build the extension and the stamp duty paid when the next person bits it. And the PAYE, Corporation tax, NI paid by the firm that builds the extension. Yes, apart from that, no tax is paid ;)

Now, you could try and collect CGT on the uplift as well, but either less work will be done, which impacts tax revenue, employment and growth right now for a potential tax slice in the future, but there will be fewer moves and less stamp duty and CGT as a result..l

It’s development
No different from a business doing it
It also reduces smaller property housing stock making it harder for people to buy
I think it’s right to tax development and If less are extended as a result it’s a win win for helping people afford a home

I agree. Particularly in the case of adding another storey to a bungalow when they’re like hen’s teeth. The shortage of bungalows is a real impediment to downsizing.

My parents have been thinking of downsizing their London house but i doubt they will if this happens!

Good point
So many people complaining the elderly should down size, what to exactly with so many people extending

Its peeves me off that people are clearly extending and making money on those extensions yet very few think they should pay cgtax on what is basically development!

Yet As soon as someone who did nothing to their house but live in it all their lives sells they think they should be taxed
To much mememe in this country

Jesus fucking Christ

At least just tax those with properties over £1.5K who also have a decent pension pot

Not those who are relying on selling their homes with no pension in place who will then lose precious money they’re currently intending on living off when they do hit retirement age

FFS

I’m suspicious this is going to impact harshly and more on women. Let’s say you’re a separating couple and you have a joint property and that has to be sold to give a share each towards a new place. How much less do you now have, after a tax like this, to get a room for your kids in a new place? You’ll likely have less earning power (or money to spend) if you need to cover your own childcare and not share it with your partner because you don’t live together any more. And so on and so on. What account will be taken of this so that single parent households aren’t punished? Also I don’t want the country to be somewhere where buying and selling and moving is unaffordable. We want economic growth and a skilled workforce which often needs a mobile workforce.

Now would be the time to do it if it’s worth a lot

Okay… but, you’ve now opened the door to the possibility of losses from a CGT perspective. Many extensions are done to make the property more liveable, but after taking into the account the costs (for which a home owner, unlike a developer, cannot recover VAT) there is often not a commensurate rise in value because the cost of building work is so high. Now the owner has a tax loss to offset against other gains. A net outflow from the treasury.

In a falling market, which is what they are creating by taxing all property gains above whatever threshold they decide, there will be also be many more people who then have losses for CGT purposes. So until the market rises, which will be after they have been long gone, that will also just reduce tax revenue.

CGT is just a tax on inflation for those who hold assets for a long time, which is a tax on the governments inability to manage the economy. It’s just not logical. Which I agree with you, is probably while they’ll do something! But it’s economically illiterate, and will cost tax revenue not increase it in the short to medium term for CGT, VAT and stamp duty as a minimum.

anyone who flips should, in the current rules, pay income tax not cgt on the gain.

if you buy an asset with the sole intention to sell it for a profit - that's trading and is subject to income tax.

the problem is most will report a cgt gain, and Hmrc are woefully understaffed and don't catch nearly enough of them.

There are various ways to increase revenue but this one is madness.

Why not reduce the rate at which traders must charge VAT so that it starts at £0 rather than the £80k (?) that it currently is. You remove the unfair competitive advantage the smaller tradespeople currently have and you reduce their ability to hide their income so you are gaining both vat revenue and income tax and NI revenue in one move.

It’s a good idea to make houses places to live and not savings schemes.

i think CGT on primary residences are a good thing too, ideally at the highest marginal tax rate someone pays. But, it needs to be indexed to CPI. No one should be paying tax just because a house has gone up with inflation.

I would be all for a steeply tiered house value tax as well, in return for scrapping stamp duty.

Taxes should both raise revenue and make markets efficient (and thus help economic growth). What we have at the moment is people taking up huge houses that they don’t need or, worse in some cases, leaving properties empty, instead of investing in their pension (see lots of comments above). This makes housing impossibly expensive for the young and keeps investment funds locked in economically useless assets.

No, it is not “deluded” at all. And we aren’t “getting away” with anything, we are being massively taxed. And yes, we absolutely can and will leave and yes, you will miss our enormous contributions. And when you complain about that? When the country is in an even bigger pile of shit because there is no one left to pay? There won’t be a violin small enough.

Really? Say your house has grown in value from £1M to £1.6M. And you want to downsize now to an £800,000 property. New CGT would be £120,000 on sale, but you would dodge the Stamp Duty of £80,000. So you would lose £40,000 overall. It’s not nothing, but it could be easily recovered with some good buying negotiation. And you would free up £800,000 in cash.

So much of the house price increase has been due to inflation though, We bought in 2009. Since 2009 inflation alone has increased the house price by 72%.

It's just inflation. But its more visible on property

Once that door is opened “CGT on primary homes” rest assured the threshold will drop over time until all primary homes are subject to CGT. Next question who will buy a house and renovate it when any gain will be taxed.., Example… house purchased at £800K, renovated and extended over 10 years using earned (and hence already taxed money), new value £2M, and then pay CGT on the gain (note the gain made by using taxed income to renovate). Housing stock will not be invested in or maintained!!

And you can deduct any capital improvement costs from the gain so I’m not sure what your point is

I've just gone into DH's study and he is looking at property abroad..

We both work largely from home. He currently goes into the office two days a week but realistically this is just to show his face and it isn't strictly necessary.

Changes to IHT, pensions and property are just too much. There are better options for us personally (mid 50s, kids just finishing uni, all of our money tied up in the house and pensions because we thought we were being very sensible)

Only from the point of the change onwards since before that you wouldn't have known that it was necessary to keep the receipts.

Those who buy a doer upper house next year are fine. Those who did it 20 years ago are not.

And I’m sorry you feel that way but can you not see why this is needed?

the country is in dire straights. They can’t raise income tax because it would leave most people unable to survive. They try to raise wealth taxes and everyone kicks off because they say the billionaires will leave Britain. They try to do this and everyone says they’re going to sell up and move abroad. But in reality, this will only be a little more than stamp duty was. It’s just sellers not buyers who pay.

We have an NHS that can’t function, because the population is older and unhealthier than it was was the NHS was introduced. We have a state pension system that is crumbling because of the triple lock, and because people are living so much longer and are on it for 30 years now. We can’t get rid of the NHS because people couldn’t afford to pay for insurance. We can’t get rid of the triple lock because people lose their minds when changes to pensions are mentioned. What is there to do?

And those who bought 20 years ago will have also seen a 95% appreciation in their asset without anything else being done. Regardless of what other improvements they had, just by virtue of owning the house, it has increased.

That would be slightly fairer.
I'd make it even more fair by taking the original purchase price and increasing it at the rate of inflation / CPI / RPI over the time between original purchase and selling so the figures are more comparable in today's money and then tax is paid on the difference.
So if someone bought a house in 1979 for £30,000 and sold it in 2025 for £600,000
£30,000 in 1979 would be roughly equivalent to about £194,000 in 2025.
So maybe at a small adjustment for improvements at a fixed rate of maybe 10% £194,000
That original amount of money would have been worth about 210,000 pounds so the tax would be on 390,000 pounds which is unearned profit.

That simply isn't true.

I purchased my house for £840k in 2009. I have spent about 450k on it. (so a £1,290,000 total spend). Inflation means it has increased by 72% since 2009 (£928,800) but that is just inflation. That puts it at £2.2m (cost plus inflation). It's actually worth about £1.8m in terms of what the market here will pay on a good day (so Ive actually made a loss when inflation is factored in). However on paper I have a £960,000 capital gain since I don't have receipts from the various improvements over the years which would trigger a cgt liability of £230,000.

It simply isn't worth our while downsizing. We would be better off spending all of our cash and re-mortgaging the house to extract more cash and then leaving the remaining equity in the house to be dealt with under IHT rules. Or moving abroad.