Chancellor Rachel Reeves is considering levying capital gains tax on the sale of houses valued over £1.5bn as she seeks to plug a £40bn gap in public finances.
The proposed change, likely to be implemented in this year's Autumn Budget, would require higher-rate taxpayers to pay 24 per cent of any profit made from the increase in their property's value, while basic rate taxpayers would be liable for 18 per cent, as reported by .
At present, the sale of a 'primary' residence in the º£½ÇÊÓƵ is exempt from capital gains tax under a policy known as private residence relief.
As reported first by The Times, officials estimate that a threshold of £1.5m would affect approximately 120,000 homeowners who are higher-rate taxpayers with capital gains tax bills of £199,973.
However, experts have raised concerns that the £1.5m threshold could create a cliff-edge effect, with prices escalating for more expensive homes as sellers factor in the tax, and activity clustering just below the figure as others seek to avoid it entirely.
It could also deter downsizing, an issue particularly prevalent in the º£½ÇÊÓƵ – according to a Zoopla report, over four in 10 homeowners aged 65 and over reside in homes larger than necessary.
A Treasury spokesperson said: "As set out in the Plan for Change, 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, as seen with our planning reforms, which are expected to grow the economy by £6.8bn and cut borrowing by £3.4bn.
"We are committed to keeping taxes for working people as low as possible, which is why at last Autumn's Budget, we protected working people's payslips and kept our promise not to raise the basic, higher or additional rates of Income Tax, employee National Insurance, or VAT."
Property tax rumours swirl
Rumours have also circulated regarding a proportional property levy on homes valued above £500,000, though government sources have dismissed the credibility of this figure.
Such a property levy – should it be introduced – would seek to substitute stamp duty and council tax, two levies desperately requiring overhaul.
It would additionally provide Reeves with much-needed revenue, given her commitment to avoid increasing taxes on working people.
The Chancellor has also faced mounting pressure to introduce additional wealth-based levies, particularly from deputy prime minister Angela Rayner.
The National Institute of Economic and Social Research (NIESR) has calculated that taxes may need to rise by over £50bn to meet expenditure and restore credible headroom that would reassure bond traders about Labour's fiscal strategy. Capital Economics and other prominent analysts predict that taxes will need to increase in the region of £15bn to £25bn.
