"Yet another ill thought-out tax grab by Rachel Reeves"

Mortgage intermediaries are preparing for a marked shift in borrower behaviour amid mounting expectations that the Autumn Budget could end the blanket capital gains tax (CGT) relief on main residences above a yet-to-be-decided threshold.

Officials are examining whether to withdraw private residence relief for higher-value properties and charge CGT on gains realised at sale. The rates under discussion mirror existing CGT levels: 24 per cent for higher-rate taxpayers and 18 per cent for basic-rate taxpayers. A separate option - an entirely new levy on the disposal of expensive homes - remains in play, but CGT reform is understood to be the simpler instrument to deploy quickly.

Advisers say either route would recast incentives at the top of the market, with consequences that would ripple through lending volumes, product choice and completion times. London and the South East, where price bands are tightest against any likely threshold, would be most exposed to cliff-edge effects.

Anthony Emmerson of Trinity Financial agreed – calling the proposal “Yet another ill thought-out tax grab by Rachel Reeves.”

“This will have such a negative impact on the housing market causing that portion of the housing market to stall massively,” he continued. Thus lowering the tax take overall. 

For brokers, the immediate implication is fewer discretionary sellers and a drop in chains initiated by downsizers. That could push a greater share of activity into remortgage and product-transfer business, particularly among older borrowers who choose to improve rather than move. It may also lengthen completion timelines as vendors and purchasers calibrate offers around any threshold.

“People will hesitate to sell if they are going to get taxed on the capital gain,” explains Emmerson – and it’s not just immediate sales that will suffer. “People will hesitate to invest in improvements to houses which may improve its value and cause a capital gains tax later down the line,” he said.

Harps Garcha, director at Slough-based Brooklyns Financial, told FT Adviser that the policy would “become state reliant”. She said: “The government’s plan will have a massive impact on London and the South East, where many middle-class families have sacrificed themselves for years to build wealth through their homes.

“These homeowners expected to rely on that equity in retirement by downsizing, yet they now face being taxed twice, first through stamp duty and then capital gains.”
“Rather than rewarding prudence, this policy punishes those who have worked hard and planned responsibly for their future.”

There is unease, too, about the effect on retirees seeking to unlock housing equity. Nick Flynn, retirement income director at Canada Life, told The Times: “Many pensioners have very modest incomes, despite living in properties that have appreciated in value over the years.

“These individuals may need to rely on their properties to help fund retirement costs, particularly given the prevalence of under-saving into pensions.
“Taxing main residences will limit people’s options, discouraging mobility in the housing market and freezing people in homes that are larger than they need - running counter to wider housing policy objectives.”

Katherine Stagg of Stagg Mortgages said that she finds the proposed tax “deeply concerning.”

“For many, their home isn’t just an asset - it’s a legacy, a retirement plan, and a source of emotional stability,” she told Mortgage Introducer. “Introducing CGT on properties over £1.5 million risks penalising those who’ve planned responsibly, especially older homeowners looking to downsize or support loved ones. It could freeze parts of the market, discourage mobility, and create unintended financial strain for families who’ve never considered themselves “wealthy” - just fortunate to have built something over time.”

From a policy design standpoint, the Institute for Fiscal Studies has suggested incremental alternatives within council tax rather than CGT. Short of reinventing council tax entirely, the IFS thinks the current system could be made more proportional by increasing council tax multipliers for properties in the highest bands or even adding additional bands.

The broadcaster Kirstie Allsopp has also warned that the debate itself risks “destabilising the property market”.

The Treasury has declined to give a running commentary on Budget decisions. A spokesperson said: “We are committed to keeping taxes for working people as low as possible, which is why at last Autumn’s Budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of Income Tax, employee National Insurance, or VAT.”

What brokers and lenders should watch now

• Pipeline management & pricing
  Expect longer marketing periods and renegotiations near any threshold. Build flexibility into rate locks and monitor fall-throughs where vendors decide to sit tight.
   
• Remortgage tilt
  If mobility slows, case mix will skew further towards product transfers and further advances. Consider messaging around home-improvement finance and energy-efficiency retrofits.
   
• Older borrowers
  Anticipate more interest in later-life products if downsizing wanes. Coordinate early with specialist lenders on affordability assessments that reflect pension income.
• Valuation sensitivity
  Thorough desk-top sense-checks where asking prices hover around a notional line (for example, £1.5m) to pre-empt last-minute repricing or gazundering.
   
• Regional exposure
  London and South East pipelines are most vulnerable to cliff-edge effects. Diversification of introducer relationships outside prime postcodes may help smooth volumes.

No decisions have been taken ahead of the Autumn Budget. But for the mortgage trade, the direction of travel is clear: if CGT on main residences is introduced at higher price points, activity is likely to concentrate in refinancing rather than purchases, with the upper tiers of the market doing less of the heavy lifting for completions.