Rachel Reeves is considering plans to tax homes worth more than £1.5m as part of a plan to close the public finance hole.
According to the New York Times, one measure by the Prime Minister and the Treasury is to end tax exemption for long-term capital gains on primary homes above £1.5 million.
Selling homes above this level will be subject to a capital gains tax of 18% for the base rate taxpayer, while a highway taxpayer will be subject to a 24% for the base rate taxpayer.
Officials believe that the threshold will hit about 120,000 homeowners, who are high-interest taxpayers with capital gains tax bills paying less than £200,000.
RightMove property expert Colleen Babcock said such a move calls it a luxury home tax, which will affect homes in “the most expensive areas in London and the southeast.”
The property website says the percentage of homes sold above £1.5 million in the southeast is 10.9% and 4.4% while the average homes sold above the national average (excluding capital) is 1.6%.
Babcock added: “The London market has already felt the impact of taxation more acutely than the rest of England, which may prevent some action on the upper end.
“While our data suggest that along with the proposed stamp duty change, only a small percentage of homes for sale are within this price range, this could be a double blow to the capital.”
Other property experts say such a move will also attack pensioners who have lived in the same large house for decades but have earned moderate income.
Nick Flynn, Canada’s director of living retirement income, said: “While living in properties that have been valuable for years, many pensioners have very moderate incomes.
“These people may need to rely on their own property to help with retirement costs, especially given the prevalence of insufficient pensions.
“Taxing major homes will limit people’s choices, block the liquidity of the housing market, and freeze people in the homes larger than they need – contrary to the broader housing policy goals.”
Any such move by the Prime Minister will not appear until the fall budget.
It is understood that Reeves is taking a series of measures in the face of a loophole in public finance of at least £20 billion.
Labor has promised not to raise income tax, national insurance or VAT for employees.
