Charge CGT on primary residences to halt house price spiral, says agent
Henry Pryor believes taxing unearned profits on owning your home is a fair way to raise revenue – but that Stamp Duty should be scrapped.
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
Can’t really bring anything else to this party of comments other than to say well said you lot !
The cost of moving is high. Happily the equity in your home absorbs some of that cost. CGT would negate this flow. Moreover if you reduce peoples’ spending power you see businesses suffer: local pubs, cafes, shops in general……..
And then what??
Nothing boosts the economy better than enhanced general spending power.
What kind of idiotic trash is this? just maybe spiralling house and rental prices are caused by 10 million people wading in here Einstein.
The biggest employer in the country is small business. Small business requires investment to get started. The banks lend that investors because you have equity in your house. You start the business because you have that cushion at home. So why cut into it with CGT and stop the flow of commerce/employment at source. Almost all of my former staff saved and bought property. After X years they started tgeir own businesses. In turn they employ people. And so the blood flows and the National body lives.
How to cause the biggest crash in house prices ever seen in the UK: Announce CGT to be charged on profits next year!!! There are 25.2m residential properties in England. Average price just under £300,000. Total value of residential properties in England – £7.5 trillion. If prices increase by 10% over 2-3 years that’s £750 billion pounds of tax free unearned income that goes into the wealth of England, allowing millions of people to spend their equity by remortgaging, credit cards, downsizing or just selling. Can you imagine our economy without this income? Or worse – if prices dropped by 10-20% by introducing CGT. Absolute economic free fall.
I have rarely seen such an out of touch piece. It doesn’t take much to see landlords leaving in droves. My letting agency caters for the retired on a national basis and every day at least 20% of the applicants are calling because they have been served notice with the landlord selling up. I have never seen anything like it in over 30yrs in agency.
As far as CGT on main residence I can just reiterate the previous comment that all it will do is clog up the market with people staying put rather than pay the tax. May well be better for builders but certainly not the industry we represent or the economy as a whole. This whole idea that you shouldn’t be able to earn money anymore is depressing to say the least comrade
It’s rubbish to claim that applying CGT to Principal Private Residences will cause the housing market to seize up. Are you seriously saying that people did not move house before 1965, before the zero-rating of PPRs and the invention of CGT? People used to be taxed under Schedule A on the imputed rental value of their houses. Then the Conservatives zero-rated homes and off boomed the property market, along with a mass obsession with the insidious notion of the “property ladder” and people burying their wealth in unproven housing instead of business investment via shares and pension schemes.
Private homes should pay CGT, just as landlords do when they sell their houses, and as housebuilders pay corporation tax: it will level the playing field and only be fair. Abolishing stamp duty would be some compensation and remove the ludicrous situation that to take a new job, you have to pay at least a year’s salary in SDLT. Stamp duty reduces mobility, discourages people from moving jobs, and incentives some to adopt long commutes, clogging up the road and rail networks.
So just ignore the reason and the cause of house price inflation? And tax it so no one sells or moves ever again unless they die.
Estate agents are not property or tax advisors. They are salespeople. Please approach a professional before making a decision instead.