Property-based taxation and capital gains surge back to the top of Budget agenda after Chancellor's comments
With every interview, Chancellor Rachel Reeves offers new hints as to where she will find the billions of pounds she needs to plug the crater-sized UK financial deficit.
With her latest comments, the country’s mortgage brokers and property professionals are back on alert after she made it clear that the government’s search for new revenue will increasingly target those with substantial assets, rather than relying on broader tax rises that affect working families.
Speaking in Washington, Ms Reeves articulated her guiding principle, as reported in The Guardian: “I do think those with the broadest shoulders should pay their fair share of tax and I think you can see that from my actions last year at the budget.” She was careful to add, “I want the UK to remain an attractive place, but we’ve got to get the balance right and I do think that if Britain is your home you should pay your taxes here.” She added: “Wealth’s not about your annual salary.”
Nicholas Mendes, pictured above, mortgage technical manager at John Charcol, interpreted these remarks as a clear shift to property-based taxation rather than income.
He said: “With a formal wealth tax off the table, I’d expect movement on council tax revaluation or banding, and potentially capital gains tax on second homes - ways to tap asset wealth without breaching Labour’s pledge not to raise income tax or VAT.
“If adopted, such measures would be felt more in higher-value areas, but the impact on homeowners and investors will ultimately depend on the detail.”
The Chancellor’s latest comments come amid mounting speculation that the government will eschew increases to income tax, national insurance, or VAT, in favour of measures more acutely focused on wealth and property. For mortgage brokers, the implications are significant. Proposals under consideration include reforms to inheritance tax and the introduction of new property levies, potentially in the form of a capital gains tax on primary residences valued above £1.5 million, or a proportional property tax to replace the current council tax system. Such measures would directly impact those whose wealth is tied up in property, particularly in London and the South East, where even modest homes can exceed the suggested thresholds.
The Chancellor has been at pains to stress that these moves are not designed to deter success or investment. “I want Britain to be a great place for talent, for entrepreneurs, for successful individuals to come, and that requires getting the balance right,” she said.
This policy direction has already prompted a degree of unease among high-net-worth individuals. Recent research suggests that nearly 80 per cent of wealthy Britons expect taxes to rise in the coming year, with many reviewing their estate plans in anticipation. With public finances under strain and inflation still stubbornly high, the Chancellor has little room for manoeuvre. As one Treasury source put it, “Borrowing more would put our public finances in jeopardy, saddling future generations with more debt, while a return to austerity would condemn the country to decline.”
