The £ 3 billion from soaring house prices over the past 20 years should be subject to a capital gains levy so that poorer households can avoid paying more taxes, a urged a think tank.
A Resolution Foundation report said the government should consider applying the Capital Gains Tax (CGT) to increases in the value of primary residences in the UK as well as sales of second homes in the United Kingdom. instead of increasing income and profit tax.
The think tank admitted it would be a tough sell, but said house prices had risen 86% more than inflation over the past two decades and the gains had been “unearned, uneven and untaxed ”.
The increase in national insurance contributions and the increase in corporation tax in 2023 will mean that taxes as a share of the economy will return to levels last seen in the 1950s, but Real estate fallout has been completely absent from the debate, said the Resolution Foundation.
Other capital gains are attracting tax rates between 10% and 28%, and the benefits of the housing boom have disproportionately accrued to the better-off, the elderly and those living in London, a- he added.
Households over 60 earn an average of £ 80,000 in real estate, compared to less than £ 20,000 for those under 40. For the richest 10% of households it was £ 174,000, while for the poorest third it was £ 1,000. Average earnings in London (£ 76,000) were almost four times that in the North East (£ 21,000).
Adam Corlett, senior economist for the Resolution Foundation, said the £ 3 billion capital gains on primary residences made up one-fifth of all wealth in the UK.
“Choosing not to tax this huge real estate windfall because of the political and administrative challenges involved has real consequences, including higher taxes for workers and businesses,” he said.
‘With the government set to raise taxes by an equivalent of £ 3,000 on every household in Britain by the middle of the decade, it is time to reconsider a range of practical options for taxing these windfall unearned gains if we are to protect the lives of workers. standards in the years to come.
None of the major political parties have indicated they would be willing to take the risk of angering owners, but Labor has explored the possibility of imposing wealth taxes on shareholders.
The Resolution Foundation report, which was produced in partnership with the abrdn Financial Fairness Trust, said the CGT levy on primary residences at 28% would raise £ 11 billion a year – slightly less than the £ 12 billion that the Treasury will get from the increase in national insurance contributions next April. Under the plan, landowners would be required to pay nothing until they leave the property or die.
The think tank said smaller proposals would always increase significant amounts. Setting an allowance of £ 75,000 would mean more than half of estates would have to pay no tax, while raising £ 4bn a year. If unearned capital gains on a primary residence could no longer be covered by the zero rate bracket for inheritance tax, up to £ 3 billion would be levied.