Homeowners across the UK may be looking at a big shake-up in property taxation, with Chancellor Rachel Reeves reportedly planning to make the sale of certain family homes liable for capital gains tax.
The move, described by some as a form of “mansion tax,” could hit pensioners who have seen their property values soar but now want to downsize.
How the Proposed Capital Gains Tax Would Work
Currently, people selling their main home benefit from private residence relief, meaning they don’t pay capital gains tax on the profit.
But under the new plan, those exemptions could be removed for higher-value properties.
Estimates suggest that homes valued over £1.5 million could be affected.
Higher-rate taxpayers could pay 24% of any gain, while basic-rate taxpayers would pay 18%.
For some, this could mean tax bills approaching £200,000 — a massive sum for many families.
Why This Could Hit Pensioners Hard
Property experts warn that long-term owners, especially pensioners, could be caught off guard.
Many bought their homes decades ago when prices were far lower, and a sudden capital gains tax could make downsizing unaffordable.
Critics say this may discourage people from selling, leaving larger homes off the market and limiting housing availability for younger families.
Political Backlash and Broken Promises
The proposal has sparked political outrage, as Labour had previously ruled out taxing family home sales, calling it “a bad idea.”
Keir Starmer and Rachel Reeves both dismissed such measures ahead of last year’s general election.
Now, the potential U-turn is drawing criticism from opposition parties and property commentators alike.
Tory leader Kemi Badenoch said, “Rachel Reeves will tax anyone and anything to cover for her economic incompetence.”
Wider Tax Changes on the Horizon
Reeves is reportedly considering unveiling these plans in her autumn Budget as she faces an estimated £50 billion shortfall in public finances.
The Chancellor is also said to be exploring changes to stamp duty, council tax, and inheritance tax, though many details remain unconfirmed.
One controversial idea is replacing stamp duty with a proportional annual property tax for homes valued above £500,000.
While intended to open up the market and encourage downsizing, critics argue it could punish hardworking homeowners and destabilize property prices.
How the Market Could Be Affected
Industry experts warn that removing private residence relief for high-value homes could distort the housing market.
Aneisha Beveridge from Hamptons says the £1.5 million threshold could create a “cliff edge,” discouraging transactions and affecting Treasury revenues.
Tom Bill from Knight Frank points out that in prime London, home prices have actually fallen over the last decade, so the tax may not generate significant revenue.
Simon Brown from Landmark Information Group adds that discouraging downsizing would reduce market movement and limit choice for families and first-time buyers.
Understanding Private Residence Relief
Currently, homeowners can avoid capital gains tax if they:
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Have only one home and have lived there as their main residence
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Haven’t rented out parts of it (except lodgers)
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Haven’t used a part exclusively for business
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Own land under 5,000 square meters
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Didn’t buy the property purely for investment purposes
If these conditions are met, the homeowner pays no tax on the sale. Removing the relief for high-value homes would mark a major shift for long-term owners.
Government Response
Treasury ministers have declined to confirm details, insisting any changes will be announced at the Budget. A spokesperson emphasized that growing the economy, rather than raising taxes, is the Government’s focus. They highlighted recent planning reforms projected to boost the economy by £6.8 billion and reduce borrowing by £3.4 billion, while pledging to keep taxes for working people as low as possible.
What Lies Ahead
For now, homeowners, pensioners, and the property market are left waiting for clarity. The proposals highlight the Government’s ongoing challenge of balancing public finances while avoiding measures that could punish families who have worked hard to own their homes.
