Rachel Reeves plans to tax high-value homes to plug fiscal hole

The chancellor may use the autumn budget to end the tax exemption under plans that will be seen as a ‘mansion tax’.

Rachel Reeves is drawing up plans to hit the owners of high-value properties with capital gains tax when they sell their homes as she attempts to fill a £40 billion hole in the public finances.
The chancellor is considering using the autumn budget to end the current exemption from capital gains tax that people enjoy when they sell their “primary” residence under plans that will be seen as a “mansion tax”.
Higher-rate taxpayers would have to pay 24 per cent of the value of any “gain” they make from the increase in the value of their property while basic rate taxpayers would have to pay 18 per cent.

Under the plans the current exemption from capital gains tax, known as private residence relief, would come to an end for properties above a certain threshold.
While the threshold is the subject of live discussion in the Treasury, officials believe it could raise significant sums of money. A threshold of £1.5 million would hit around 120,000 homeowners who are higher-rate taxpayers with capital gains tax bills of £199,973.
However, property experts warned that the owners of more expensive properties could choose to simply stay put instead of selling up and this could stymie the housing market and limit revenues for the government. There are also concerns that it could hit pensioners who want to downsize particularly hard.

Aneisha Beveridge, head of research at the estate agent Hamptons, said: “It’s a big change that would hit long-term owners hardest and create a cliff-edge at £1.5 million, distorting behaviour around that point.
“While the headline gains look substantial, they’re often the result of decades of ownership and, in some cases, house prices haven’t even kept pace with inflation.
“For households who don’t need to move, this could act as a strong disincentive to sell, dampening transactions and potentially weighing on house price growth and Treasury revenues alike.”
The Treasury is also looking at the idea of imposing an entirely new tax on the sale of more expensive homes, as first reported by The Guardian. However, government sources rejected suggestions that the threshold for a potential annual levy would be £500,000, suggesting it would have to be far higher to avoid slowing the market.
No decisions have been taken given the budget is months out. Reeves is said to be concerned that Britain’s property taxes are outdated and in need of reform and she also has limited room for manoeuvre given Labour’s manifesto commitments.

The chancellor will put the principle of “fairness” at the heart of her budget. She is looking at property taxes after ruling out increasing income tax, national insurance or VAT in Labour’s manifesto. The manifesto also included an explicit pledge by the government not to raise taxes on working people.
There are concerns that the current council tax system is deeply unfair because it is based on property values from 1991. Critics say that this has led to a “regressive” system under which a house valued at £1 million pays only twice as much council tax as a house worth £80,000.
The Treasury has considered adding additional bands in the past but any changes are likely to be highly complex and would carry significant political risk.
Removing the capital gains tax exemption for higher-value properties is viewed as a more realistic revenue-raiser.

Why not a “land value tax” instead of a “property tax”?

Won’t somebody think of the poor multi-millionaires?

The thing i was looking at yesterday was that she was looking at targeting houses worth 290,000 or more? Is there any truth to it as £290,000 is a pretty average/mediocre house up north tbh and basically would apply to everyone down south.

I just bought my 3 bed new build on my own last year. I don’t feel like I need to pay anymore tax if they are looking at property taxes. I am sick of being taxed to the hilt and getting f-all back from this country.

This is pretty fair in my mind. Those of us who recently bought an expensive house using taxed income are protected, whereas those who have made an enormous gain sitting on their arses pay the equivalent of what we had to on stamp duty. Meanwhile most of the country’s population is left unaffected.

Not a fan of Labour so far, but to be fair this seems like a solid move

Fucking hell they are starting to act like a labour government

Maybe a land value tax next?

seems a step in the right direction

I’m a huge fan of this tax because it doesn’t impact me. 

Oh, fiscal drag. Fuck. 

I’d be more supportive if Reeves said: “Houses worth more than X times the average price”. She won’t of course. 

This is how the middle class residents of the UK get clobbered by a wealth tax far more than the actual billionaires

Stop wasting money and control spending would be much better than yet another tax. Govt hands in the pockets of most of South East, not because it’s right but because it fits their ideological model

Design it well Chancellor, cause if it hits the middle class people, it’s gonna be bad.

If your plan is this won’t hit middle class people because their house gonna get devalued as people down your ladder no longer want to buy your house because of the tax – that is a mental gymnastics right there.
Do not make it so banks are incentivised to give massive loans to people because unlike fast fashion, house and shelter is a necessity.
Make it so that it hits multiple house owners, property business, those companies who buy up houses.

Design it well. Good idea, but i do not expect this labour to design it well.

Vote Green, vote zarah’s party. red salutes to you all. 

Sincerely, Foland Brump

Taxing property is a good idea, but it should be an ongoing tax rather than a transaction tax. They seem to be considering that in order to replace council tax. Land value tax is generally better than property tax which includes the value of land improvements, but is harder to implement due to valuation.

Just need to hold onto that house sale for 3 and a half more years and wait for Reform to abolish it.

So if you own a £600,000 house and move to another £600,000 house you could end up paying a load of tax if you bought the first house for 300k. Not sure if that’s a great idea. Basically means you can only ever downsize.

Also can’t see any reason why there would be different tax rates for different income levels, this has nothing to do with income. Seems unfair.

I wonder what the net effect will be on property prices, people won’t sell but also people will be less keen to buy. Certainly will destroy liquidity in the market although could be some bargains to be had for Blackstone, Lloyds and other corporate buyers Labour seem to like. My general thinking at this point is that anything Rachel does will be revenue negative and achieve the precise opposite of what was intended (as for so many govt policies, of any stripe)

She has a raging hard-on for tax. I’d understand if she taxed unoccupied homes because that’s just waste, but we absolutely should not be taxing home ownership further. We already live in tiny homes; we have some of the smallest homes in Europe, and don’t even bother comparing them to the rest of the world. Our homes are 30-40% smaller on average than even the much more densely populated Belgium or the Netherlands. Why don’t we encourage and incentivise people to move up to bigger and bigger homes, but no, that’s not the UK way. If you step out of your mandated 3-bed semi, it’s more tax. I presume that’s after 10s of thousands those people paid in stamp duty.

I feel like an LVT accomplishes just that.

But knowing things, they’ll fall short of that.

Ffs its all ifs and buts atm nobody knows what’s going to be in the budget

I think this may have been deliberately chosen to fail. Any time someone proposes higher taxes on expensive properties, the press can always find sympathetic widows living in a big empty family home who can’t afford the rates because they gave very little real income.

“The granny tax” as the tabloids will probably name it (because it’s the laziest option possible) will then withdrawn and plans to make rich people pay their share abandoned for another decade.

The way to properly target the very wealthy is to close the gap between income tax rates and capital gains tax rates. Anyone earning income from work of more than £50,270 is taxed at 40% on that gain. The highest rate of capital gains is 32%. So our tax system is designed to reward owning things rather than doing things.

Idiots. If they weren’t bankrupting the country it would.be funny watching how hard this is going to fail. If they implement this, it will be revoked anyway, so the housing market will stagnate and collapse for 4 years. , resulting in less money for them to waste.

They are literally doing everything opposite to fixing the economy.