Treasury Minister Considers Hitting High-Value House Owners with Capital Gains Tax

Strategic Insights -

Chancellor Rachel Reeves is reported to be considering ending the current exemption from capital gains tax (CGT) for primary residences, which would see high-rate taxpayers pay 24% of any gain in the value of their home. The proposal is part of the government's efforts to raise cash in the face of dire warnings about the state of the public finances. Treasury minister Torsten Bell declined to rule out the move, stating that any potential changes would be matters for the Chancellor and would be set out at a budget.

Key Takeaways:

  • The proposed change would end the private residence relief for properties above a certain threshold, which is still under consideration but a £1.5 million starting point is being mentioned.
  • The threshold would hit around 120,000 homeowners who are higher-rate taxpayers with capital gains tax bills of £199,973.
  • The change could deter people from selling their homes, slowing the housing market, and could have a particular impact for older people looking to downsize.
  • The proposal would likely impact more heavily on London than other parts of the country, with 10.9% of homes for sale in the capital exceeding a £1.5 million threshold.
  • Tory leader Kemi Badenoch has criticized the Chancellor's "disastrous economic mismanagement" and called for cutting spending, cutting taxes, and backing the makers who keep the country going.

Statistics:

  • 120,000 homeowners who are higher-rate taxpayers would be affected by the proposed change.
  • The proposed capital gains tax bill would be £199,973 for those affected.
  • 10.9% of homes for sale in London would exceed a £1.5 million threshold.
  • The London market is already feeling the effects of taxation more acutely than other parts of England.
  • The UK is set for a £41 billion shortfall on the Chancellor's self-imposed rule of balancing day-to-day spending with tax receipts in 2029-30.

Sources:

  • The Times
  • Rightmove
  • NIESR economic think tank
  • Chancellor Rachel Reeves' office (Torsten Bell, Treasury minister)