Property Tax Hike Forecast Ahead Of Autumn Budget

A steady drip-feed of leaks from the Treasury continues to make headlines in what is building up to be an extremely unsettling period ahead of the Autumn Budget, with a now expected warning of a heavy duty property tax hikes.

So, are we in for a seismic shake-up of the property tax landscape before the end of the year? All will be revealed in late October/early November. While we wait with bated breath for the big reveal, below summarises the reforms currently under scrutiny.

Goodbye Stamp Duty, hello new property tax

Arguably the biggest of the unconfirmed proposals under consideration by the Chancellor is to ditch Stamp Duty altogether and replace with a new proportional levy on homes worth over £500,000. This new tax could be paid by sellers when a property changes hands, and collected by HMRC. Alternatively, it could be an annual levy, potentially payable when the property is sold.

Property industry experts are largely in agreement that Stamp Duty is overdue an overhaul, but any significant change is predicted to be costly, complicated, and politically divisive.

Capital Gains On Primary Residences

At present, principal homes are exempt from CGT under Private Residence Relief. One option under discussion is that residences sold for more than £500,000 would lose their CGT exemption, regardless of whether they are a main home, with sellers footing the bill.

At current rates, this would mean higher-rate taxpayers handing over 24% of any uplift in the value of their property.

Mansion Tax

The same rumour mill that talks of CGT extensions also reference a potential Mansion Tax, indicating homes worth more than £1.5mn could be hit with new or higher charges.

It’s unclear whether this would come in the form of a new levy, as part of the SDLT overhaul referenced above, or as an update to Capital Gains or Council Tax regimes.

Update Council Tax

Council Tax has been a bone of contention for time and eternity. The annual local levy is currently based on very outdated property valuations from 1991, and is widely seen as regressive – hitting smaller households harder than larger or more expensive residences.

The idea has been muted for homes worth up to £500k, with bills starting at £800 per year, and collected by local councils. This would do away with the overfunding of various councils in affluent areas of inner London, particularly Westminster, Wandsworth and Kensington and Chelsea councils.

Extend Inheritance Tax

A few minor changes are under discussion to Inheritance Tax and include, extending the death tax’s reach to overseas assets and making it harder to “gift” wealth to the next generation.

An end to the “seven year rule” (which allows tax-free gifting if the giver survives at least seven years beyond the gift date) or a cap on lifetime gifting have been floated.

Possible outcome? Parents may well be prevented from making unlimited tax-free gifts to their children.

National Insurance On Rental Income

Chancellor Rachel Reeves is “considering” expanding the reach of National Insurance to include landlord’s income from rental properties.

At present, National Insurance contributions are charged at 8% of income for employees, with exclusions for most earnings from property, pensions and savings. The rate drops to 2% for earnings above £50,000.

New Wealth Tax

Say hello to a possible new “Wealth Tax” targeting the super-rich. A 2% levy on an individual’s net worth above £10mn has been mooted bringing an estimated £11bn a year for the national coffers.