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A new report wants the government to consider imposing a capital gains tax on profits generated from appreciating home values ​​for all properties, not just others.
The report says existing home owners, and especially those who bought in the late 1990s and early 2000s, made what it calls “largely unearned gains.”
The report, from the Resolution Foundation and the ‘abrdn’ Financial Fairness Trust – says people aged 60 and over have seen the biggest gains – at around £ 80,000 on average – compared to an average of less than £ 20,000 for those under 40. age.
The gains were largest in London, where people have earned an average of £ 76,000 since 2000, and smallest in the north-east of England, with an average gain of just £ 21,000.
With rising house prices accounting for the vast majority of the overall increase in real estate wealth over the past 20 years – rather than larger housing stock or home improvements – the report states that “this windfall of 3 Trillion pounds sterling has not been won for the most part.
He goes on to say that these windfall profits have been “largely untaxed as well – principal residences being exempt from capital gains tax, unlike other assets where capital gains are subject to tax rates. ‘tax between 10 and 28 percent “.
The report states: “The extension of the scope of the CGT to main residences with a rate of 28% on all real estate gains made over the past 20 years could generate around £ 11 billion per year, owners being required to pay nothing until they leave their homes. property or pass away.
He suggests setting an allowance of £ 75,000 which, he adds, would mean more than half of estates would not have to pay any tax, while raising £ 4 billion a year.
“Alternatively, unearned capital gains on a primary residence could no longer be covered by the zero-rate band of inheritance tax, bringing up to £ 3 billion,” he suggests .
The income generated from these deals could also be used to make further progress on a major downside to this wealth windfall – the decline in home ownership among young people, who have been excluded from the real estate market.
Adam Corlett, senior economist at the Resolution Foundation, said: “The growth in anti-inflationary house prices over the past 20 years has generated a windfall of unearned, unequal and untaxed wealth in Britain worth £ 3 trillion, which today represents one-fifth of all wealth. . But not everyone shared the loot, with older homeowners making an average of over £ 80,000, while the bottom third of households earned less than £ 1,000.
“Choosing not to tax this huge real estate windfall because of the political and administrative challenges involved has real consequences, including higher taxes for workers and businesses.
‘With the government set to raise taxes by an equivalent of £ 3,000 on every household in Britain by the middle of the decade, it is time to reconsider a range of practical options for taxing these windfall unearned gains if we are to protect the lives of workers. standards in the years to come.
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