What the reforms could look like
Prime Minister Reeves has signalled a shift in how property is taxed, with several ideas under consideration aimed at addressing wealth inequality, housing supply, and tax efficiency. The most talked-about proposal is to expand capital gains tax (CGT) to apply to gains on main residences, alongside reforms to how other property-related taxes are assessed. While the details are still fluid, policymakers are weighing how such changes could be implemented without unduly destabilising the market or squeezing first-time buyers.
Capital gains tax on main homes: the core idea
At present, UK residents generally do not pay CGT on the sale of their primary home, thanks to private residence relief. A policy to broaden CGT coverage to main homes would mean that any appreciation in value between purchase and sale could be taxable, subject to exemptions and reliefs. Supporters argue this would curb speculative price rises and raise revenue for public services. Critics warn it could increase the cost of moving, discourage upgrades to bigger properties, and penalise households that have remained in their homes for decades.
How it could be implemented
Options under consideration include:
- Introducing a CGT rate on main-home gains, potentially with annual exemptions and inflation-based reliefs.
- Linking CGT to duration of residence, offering greater relief for long-occupancy homes.
- Combining CGT with existing stamp duty or a revised buyer’s levy to smooth the transition for buyers and sellers.
The complexity lies in reconciliation with existing reliefs, determining what counts as “main home,” and defining exemptions for those who have owned multiple properties or lived in different regions for work.
Other tax levers under consideration
Beyond CGT on main homes, Reeves-era policy ideas could include:
- Stamp duty reform: Changes to the stamp duty land tax regime to incentivise longer tenures, or to reduce upfront costs for first-time buyers while funding new housing supply.
- Annual property taxes: A shift toward an annual charge based on property value or occupancy status, potentially replacing some transaction-based taxes.
- <strongInheritance and gifting rules: Tightening of allowances or basing taxes on cumulative gains across generations, affecting intergenerational wealth transfer.
These measures could be designed to balance revenue needs with the goal of keeping housing affordable and ensuring the market remains functional for buyers and renters alike.
Market implications: buyers, sellers, and developers
For buyers, higher upfront or ongoing taxes could push some into smaller homes or regions with lower prices. First-time buyers might face more stringent criteria or higher required deposits if lenders perceive greater tax risk attached to housing investments. On the other hand, a more stable tax framework could improve predictability, encouraging longer-term planning and reducing speculative spikes.
For sellers, a CGT on main homes could temper price growth, but it might also shorten the time properties stay on the market if sellers seek to lock in gains before potential changes take effect. The need to factor in tax implications could become a standard part of decision-making, alongside mortgage rates and local demand.
For developers and renters, reform could influence where and what gets built. If capital gains were taxed more heavily on investment properties, we might see a shift toward purpose-built rental schemes and a push to widen supply in affordable segments of the market.
The broader questions policymakers must answer
Any reform must consider equity, simplicity, and economic impact. Key questions include how to protect vulnerable households, how to avoid penalising mobility, and how to fund public services without chilling demand in areas that already face affordability challenges. A staged rollout with clear reliefs, transitional arrangements, and robust stakeholder consultation could help cushion the market from shocks while achieving the intended goals.
Bottom line
Reeves’s property tax ideas have the potential to reshape the UK housing landscape. The most transformative proposal—CGT on main homes—could alter incentives for buying, selling, and moving house. The success of any policy will hinge on careful design, transitional safeguards, and clear communication to homeowners, buyers, and developers alike.
