Reeves looks at 'double tax' hit for retirees with property wealth

CHANCELLOR Rachel Reeves is said to be considering a radical shakeup of property taxation that experts warn could hit pensioners hardest. Currently, buyers pay stamp duty when they purchase a home, while sellers escape tax if it is their main residence.

- By Harvey Jones

That longstanding principle, known as Private Residence Relief, has meant family homes are exempt from capital gains tax (CGT).

Only second homes and buy-to-lets are taxed on sale gains.

Reeves is reported to be weighing up two major changes: scrapping stamp duty and replacing it with an annual levy on property owners, and abolishing CGT relief on main homes worth more than £1.5million.

The first change, proposed by think tank Onward, would hit homes worth between £500,000 and £1million with an annual charge of 0.54%, costing them up to £5,400. Homes above £1 million would pay 0.81%, costing £8,100 a year and rising.

The charge may either be payable annually or roll up to be cleared when the house is sold. The total bill could be huge.

The second, charging CGT on pricier home sales, would be a revolutionary shift. No Chancellor has dared to impose CGT on the sale of a person’s own home.

For decades, governments of all stripes assumed the political backlash would be overwhelming.

CGT is charged at 18% for basic rate taxpayers rising to 24% for higher earners, and realistically, the higher rate is likely to apply in most cases. The big concern here is that the £1.5million threshold would be frozen for years, or even cut, dragging more families into the tax net as house prices rise.