Rachel Reeves is considering plans for a tax on expensive homes in an effort to raise billions of pounds and close a large hole in the public finances.
The UK chancellor has ruled out increases to income tax, VAT and national insurance, but Treasury officials have been tasked with exploring other options to boost revenue.
One proposal being considered would be to remove the longstanding capital gains tax exemption on primary residences above £1.5m, according to the Times. Homeowners selling properties above that level would be subject to a capital gains tax at 18% for basic-rate taxpayers and 24% for higher taxpayers.
The proposals are set out to raise between £30bn and £40bn to stabilise the public finances while allowing Reeves to stick to her election pledge not to raise the three biggest taxes on income and consumption.
When asked about the report, a Treasury source said they would not comment on “speculation”.
Reports have also suggested officials are considering wider changes to the way property wealth is taxed. Reports suggested an annual levy on higher-value properties had been considered.
The suggestion from the thinktank Onward had urged the Treasury to impose an annual charge of 0.54% on the portion of a home’s value above £500,000, rising to 0.81% on the portion above £1m, though officials stressed no decisions had been made.
Meanwhile, the Guardian reported that ministers have been considering replacing stamp duty with a new national property tax, payable by owner-occupiers when homes are sold. It could be accompanied by a longer-term plan to replace council tax with a proportional levy linked directly to property values.
Buyers pay stamp duty under the existing framework if they purchase property worth more than £125,000. The new levy would be paid by owner-occupiers on houses worth more than £500,000 when they sell their home, with the amount due determined by the value of the property and a rate set by the government.
Critics say heavier taxation of property risks discouraging older homeowners from downsizing, weakening the housing market. But it has been argued that Britain’s tax system needs to be made fairer and that wealth tied up in property cannot be ignored as she attempts to balance the books.
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This month, Keir Starmer said Reeves’s upcoming budget would “build on what we’ve done” by focusing on living standards and “making sure that people feel better off”.
The prime minister had sought to play down warnings that the government would be forced to raise taxes this autumn and said some of the figures being circulated “are not ones I recognise”.
Starmer was responding to forecasts from the National Institute of Economic and Social Research (NIESR), which projected a shortfall of up to £51bn in the public finances, given a number of factors had knocked the chancellor’s plans to stay within Whitehall spending limits, including higher debt interest payments and a U-turn on welfare spending cuts.
