Brits face new ‘mansion tax’ raid as Rachel Reeves ‘plans big change’ | Personal Finance | Finance
Millions of families could be dragged into a new “mansion tax” under a reported Treasury plan to place capital gains tax on people’s main homes for the first time in history.
Chancellor Rachel Reeves is reported to be looking at proposals that would see owners of properties worth more than £1.5million forced to hand over huge sums to the taxman when they sell – even if it is the house they have lived in for decades.
The move, designed to plug a £40billion hole in the nation’s finances, would mean higher-rate taxpayers losing 24% of any profit they have made, while basic-rate taxpayers would hand over 18%.
Officials reportedly believe some families could be hit with bills close to £200,000, with about 120,000 households facing the charge if it comes in.
Pensioners hoping to downsize, long-term owners sitting on paper gains, and families living in once-modest homes that have risen in value risk being hit. TV property presenter Kirstie Allsopp cautioned that talk of a “mansion tax” risks “destabilising the property market”.
And others warned the reported plan, which would hit London and the south east hardest, will backfire by freezing the housing market, keeping larger homes out of reach of families who need them.
Aneisha Beveridge, head of research at 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.”
Tom Bill of Knight Frank said: “I’d be surprised if there are any gains to tax at the top end of the property market, given that prices in prime central London are down 20% over the last decade.
“If there was anything that reduced demand further, then the prospect of gains in the short-term would pretty much vanish.”
Simon Brown, chief executive of Landmark Information Group, told The Times: “Any tax that rises with property value risks slowing the housing market even further.
“If downsizing becomes less attractive, larger family homes stay off the market and transaction volumes fall.
“This reduces overall movement in the market upwards and downwards, and not only reduces choice for families and first-time buyers, but also hits the Treasury by shrinking the tax base.”
The Treasury insisted no decision has yet been made, stressing that Reeves has ruled out hikes to income tax, VAT or national insurance.
A spokesman said: “The best way to strengthen public finances is by growing the economy – which is our focus. Changes to tax-and-spend policy are not the only ways of doing this.”
