Chancellor Rachel Reeves faces significant challenges in preparation for the upcoming Budget in November. Economists have noted that she may be positioned to exceed her own government borrowing guidelines unless she identifies substantial funding to balance public spending against tax revenue. In light of this financial gap, various reports indicate that the government is contemplating reforms to stamp duty and other property taxes, after having ruled out increases to income tax, national insurance for employees, or VAT.
One specific area under consideration is capital gains tax (CGT), which applies to profits from the sale of assets such as second homes, paintings, and stocks, but currently excludes main residences. Potential reforms could remove this exemption for more expensive homes, subjecting them to CGT rates of 24% for higher-rate taxpayers and 18% for lower-rate taxpayers. The overall impact on tax revenue would depend on the proposed value threshold for affected properties, with the tax generating £13.3 billion in the last financial year. However, some analysts suggest this change might discourage high-value transactions.
Another reform being explored is the complete abolishment of stamp duty on property purchases. While this tax, which levies a charge based on property value at the time of purchase, is seen by some experts as a barrier to market movement, particularly for first-time buyers, its elimination could lead to a loss of the £11.6 billion raised from this source in the previous financial year. Any potential removal of stamp duty might occur alongside other property tax reforms.
Additionally, a reform of council tax is also under consideration. Current council tax is based on property values from 1991, which has drawn criticism for its complexity and inequalities. Proposed adjustments may face challenges related to funding distribution among different areas.
The Treasury has not yet commented directly on these considerations, but a spokesperson emphasized a commitment to maintaining low taxes for workers.
Source: https://www.bbc.com/news/articles/cm2k1m56xgjo?at_medium=RSS&at_campaign=rss