Should CGT for "principal private residences" be introduced?

RJP33

It's worth considering that if the tax was introduced given the likely drop in market prices and extra avoidance we might actually see a drop in CGT receipts rather than an increase.

adouglasmhor

Radiantsoul wrote: »

That would shift the burden of taxation from purchasers to buyers which seems like a good idea to me. I am not too sure it would operate as much of a disincentive to sellers either.

Purchasers are Buyers or am I missing something?

Radiantsoul

adouglasmhor wrote: »

Purchasers are Buyers or am I missing something?

No I meant sellers. The tax would fall on those on who are receiving a large sum of money rather than those paying a large sum of money.

StevieJ

Mr_Mumble wrote: »

Oh, I'm in complete agreement on that. But, would you prefer CGT on principal residences to some of the taxes you currently pay. E.g. abolishing Inheritance Tax (as the econ prof would like), a cut in VAT or Income Tax, fuel duty, insurance premium tax, stamp duty, etc.

In a word NO

ukcarper

Radiantsoul wrote: »

That would shift the burden of taxation from purchasers to buyers which seems like a good idea to me. I am not too sure it would operate as much of a disincentive to sellers either.

You don’t think so what about a downsizer selling a house worth £30k with say 10% tax probably wouldn’t be worth downsizing.

Mr_Mumble

michaels wrote: »

I have long been advocating this, index linked of course.

Index-linked of course, but not how it is at present! CGT on our homes would focus the minds of politicians to offer a return to indexation or taper relief methinks.

Loughton_Monkey wrote: »

Totally unworkable.

How do you do it? Valuation every 5 years and send everyone a Tax Bill for their increase? Impossible. Wait until sold, and tax 'actual' profit?

The latter, as CGT works now for other asset classes. There seems to be an assumption by many of large tax bills. As RJP33 notes this would only come about if you expect sizeable increases in the price of housing or the tax was introduced retrospectively or the politicians diddled us on inflation rather than real price rises. HM Treasury may see a fall in revenue if implemented now.

Generali wrote: »

CGT for private residences is a very poor idea IMO as it encourages older people to 'over-consume' housing, that is for an older couple or single to continue living in the family home rather than selling up and moving somewhere smaller. By selling up they'd realise a big tax liability which reduces the desire to sell.

Again the presumption of high future increases in house prices. I'd contend the only reason we've had this historic rise is because of the tax incentives (along with the leverage that mortgages provide).

Generali wrote:

A tax on wealth, ie net asset value, of a person seems like a good idea to me as it would encourage productive investment. Eg rather than living in a very large house, someone might chose to buy 2 places for the same value, live in one and rent the other out.

Isolated to property this could be possible but it sounds unworkable otherwise. A tax on someone's net assets will incentivise the purchase of non-productive assets that can be hidden away from the taxman and are a store of wealth, yes, Gold! There'd also be a big rush to become a non-dom. Given all the unintended consequences perhaps it'd just be better to increase taxation on larger properties e.g. more 'progressive' council tax banding. That'd discourage over-consumption if it were a danger.

StevieJ wrote: »

In a word NO

In a word, was this answer purely a matter of self-interest?

gauly

Would this really stop house prices increasing? I'm a bit confused about how that would happen. I can see that house price rises would be considered more of a bad thing than they are now - but that wouldn't necessarily stop them happening.

In some sense you would have more incentive, rather that less, to maximise your house price. Say you were moving for work from one £100k house to another £100k one- you would need to get top price for your old house to afford the new one because you would be losing money in tax. At the point where you buy you aren't paying the tax so past price rises are irrelevant and the seller still wants top price.

It would also limit mobility which the biggest problem in my opinion. I already know someone who refused to move his job because of the cost of stamp duty - not ideal for his company. Even worse if it could be better to go onto the dole rather than move.

If the system of CGT stayed as it is now the tax bill would get bigger the longer you lived in the house (because there is no account taken of inflation). It would be impossible to down-size after 40 years in the same house! In Germany they pay CGT on their main residence but after a time (10 years I think?) the liability disapears.

Final thing I don't like is that it would end up like Germany in that you couldn't buy a house until you were sure you were going to stay there for a long time. You would probably have to rent until your 40s when your career was established and you could afford a family house that you would keep for the rest of your life. With the horrible system of renting we have over here where you often have to move on after 6 months that would not be a good way to live.

So, a big NO from me then!

moneybagsuk

CGT on main residence with some sort of taper relief (so you reach 0% after 5 or 10 years) might not be a bad idea - discourage people from 'flipping' and make it harder to pretend somewhere is your main residence briefly to avoid tax.

michaels

Rising house prices are regressive, taxing some of the windfall gain is surely only fair but complicated (need indexation, allowances etc) and why not let price falls be offset against other tax liabilities?

I don't agree with Gen about taxing holders of assets - it may be economically efficient but I think it is unfair, if you chose to spend your income on something that can be identified as an asset you pay tax, spend it on something throw-away (blow and hookers) and you don't get taxed. There are also the examples of asset rich but income poor people who suffer.

ukcarper

moneybagsuk wrote: »

CGT on main residence with some sort of taper relief (so you reach 0% after 5 or 10 years) might not be a bad idea - discourage people from 'flipping' and make it harder to pretend somewhere is your main residence briefly to avoid tax.

How many people actually do that.