Labour's rumoured capital gains tax (CGT) is under fire for "profoundly distressing older people" as speculation is rife over what Chancellor Rachel Reeves will include in her upcoming Autumn Budget.
Reports suggest the proposals under consideration include restructuring the council tax system, replacing stamp duty with a sales-based levy, and potentially introducing CGT on primary residences.
These discussions stem from proposals by the think tank Onward, though the government has not confirmed any formal review is underway of the current property tax regime.
The suggested stamp duty alternative would see buyers pay nothing when purchasing property, instead facing taxation when selling. Critics note such reforms could take years to implement, potentially extending into the next parliamentary term.
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Rumours of a 'mansion tax' are distressing elderly people, Rachel Reeves is being warned
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Financial services firm Hargreaves Lansdown has cautioned that the rumoured changes could create significant hardship for elderly property owners who possess valuable homes but limited liquid assets.
Sarah Coles, head of personal finance, Hargreaves Lansdown: "This isn’t the first time a ‘mansion tax’ has been part of the debate. Mansion tax speculation is profoundly distressing for older people, who are property rich and cash poor.
"They’re worrying about the prospect of a whole host of options that could mean more tax if they stay in their home, and more tax if they downsize to something more affordable.
"There’s also the stress of whether the amount of tax they would pay on downsizing could mean they can’t free up the cash they need – and may not even be able to afford a smaller property.
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Taxpayers are struggling with the unsustainable burden of council tax | PA"Regardless of whether any of these changes actually make it to the statute books, they are taking a toll on people’s peace of mind. The speculation alone is causing considerable anxiety among this demographic, who face potential taxation whether remaining in their current properties or attempting to downsize."
The firm's analysis suggests implementing such measures would prove politically challenging, particularly given the electoral importance of older voters in key constituencies.
Notably, Hargreaves Lansdown cite potential supply and demand disparities in an already challenging market for sellers, potentially driving down prices for higher-value properties.
With one in six people aged over 50 incorporating downsizing into their retirement strategies, according to Hargreaves Lansdown research, the ramifications for retirement planning could prove substantial.
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Despite the uncertainty, Coles advises against making rash property decisions based on unconfirmed speculation. She emphasises that homes should be chosen primarily for their suitability to personal needs rather than potential tax implications.
"Given that we're purely in the realms of speculation, it's vital not to be driven into doing anything you wouldn't otherwise consider," Coles stated.
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The largest council tax increases per year for an average Band D property | GBNFor prospective buyers, she recommends assessing whether budgets allow flexibility for unexpected changes, whilst those contemplating downsizing should avoid rushing major life decisions.
"Ask yourself if you would be considering the move if it wasn't for the rumours, and how you would feel if nothing ended up changing," she advised
A mansion tax was put forward as a potential policy by the Liberal Democrats in the party's 2010 manifesto, suggesting a one per cent tax on property values above £2million.
In 2012, George Osborne, was said to have considered extra council tax bands, taxing pricier properties more heavily. He is thought to have dropped it because of the Conservative pledge not to introduce a mansion tax.