Capital Gains Tax (CGT) should be levied on the sale of someone’s primary residence to stop the ever-rising house price spiral.
That is the controversial view of buying agent Henry Pryor, who was reacting to claims in the election campaign that people were selling up for fear of Labour hiking CGT once in office.
Commenting on X about an article in the Financial Times (FT), he wrote: “I’m not saying that this is cobblers but as I wander around the market I’ve not seen or heard of anyone off-loading properties because of CGT fears.”
The FT story quoted Toby Tallon, a partner at wealth manager Evelyn Partners, who said some of his clients were “taking action now to sell assets”, adding that there was “a general nervousness [around] the silence [by Labour] on CGT”.
Meanwhile in the Telegraph, analysts at investment bank Citi claimed a rise in CGT was likely as Shadow Chancellor, Rachel Reeves, would bow to pressure for higher public spending.
Tax and spend
Citi’s chief UK economist Benjamin Nabarro said Labour would “ultimately tax and spend more than the current baseline”, and that slashing relief on CGT and inheritance tax were easy targets.
Mr Pryor said Labour was “highly likely” to change CGT but saw no evidence of anybody selling because they were concerned about upcoming tax changes.
He said he hadn’t seen any evidence of landlords selling up in significant numbers, despite warnings from landlord groups.
“I’m not disputing that its going to be very painful for landlords and I have a lot of sympathy for their cause – all I am observing is that there isn’t any evidence for it yet.”
“If you want to pay for the things the state needs to pay for you have to raise the money from somewhere and CGT is one of those taxes that is more palatable than others.
“I still think that it’s about time we looked at the continued exemption of people’s principal private residence – I don’t understand why that is exempt. After zero-rated VAT it’s the biggest exemption the Treasury makes and I don’t understand why people aren’t coming after it with more urgency.”
House prices
Mr Pryor claimed that house prices keep going up because “we are constantly injecting untaxed income”.
“House prices are fed by untaxed income. That’s fine if that’s what people want, but one of the fundamental issues we have is affordability, and if you look at the percentage of cash buyers nearly 40% of all transactions are 100% cash.”
He said most of the uplift in value is tax-free. “If you sit in a house and the value of that house increases by 30% and you get £100,000 as a result, that is tax free; if I go out and earn that through PAYE I pay 40% tax on it. I don’t think that’s equitable and I don’t think we can continue on that basis.”
To avoid the potential for a big CGT bill preventing families upsizing to a more expensive property, Mr Pryor suggested you could simply set the current date as a threshold for levying tax on a future rise in value – and that stamp duty should be scrapped.
He argued it would be more equitable to tax people who make a profit on owning their house rather than a tax on people looking to move home.
Pic credit: Henry Pryor