Chancellor Rachel Reeves is weighing new property-focused taxes on expensive homes as part of efforts to close a growing gap in the UK’s public finances, while maintaining her commitment not to raise income tax, VAT or national insurance.
Targeting expensive properties
The Treasury is exploring the removal of capital gains tax (CGT) exemptions on primary residences above a certain value, a move that could generate up to £40 billion. Under the proposal, gains above the threshold would be taxed at the standard CGT rates of 18 per cent for basic-rate taxpayers and 24 per cent for higher-rate taxpayers.
Other ideas on the table include an annual levy on homes valued above £500,000 and reforms to stamp duty. These could involve replacing the one-off stamp duty charge with a recurring property tax payable at the point of sale, as well as modernising council tax bands, which are still based on 1991 valuations.
Fiscal pressures and political limits
The proposals come as Reeves faces a projected shortfall of between £20 billion and £50 billion in the public finances. While the Chancellor has ruled out rises in the three major personal taxes, she has made clear that “tough choices” are needed to safeguard funding for public services and investment priorities.
Labour insiders have stressed that no decisions have been finalised, and any measures will be designed to minimise disruption to middle-income households while ensuring the wealthiest contribute more.
Concerns from the housing sector
Industry experts have warned that targeting high-value homes could have unintended effects. Removing CGT relief for properties above £1.5 million could impact around 120,000 households, potentially discouraging downsizing and dampening market mobility. Critics argue that reduced transactions could erode expected revenues and risk slowing activity in parts of the housing market already under pressure from high interest rates.
Some commentators, however, see potential in a modernised, progressive approach to property taxation, arguing it could create a more equitable system without placing further burdens on earned income.
Implications for policy and markets
If introduced, the changes would mark a significant shift in UK tax policy, signalling a move to rebalance the system towards wealth-based levies. Analysts note that the challenge will be to design reforms that are politically palatable and economically sustainable, particularly as the government prepares its first full Budget later this year.
For now, markets are watching closely for further signals from the Treasury, with investors and homeowners alike awaiting clarity on how these measures might reshape the property landscape and influence household finances in the months ahead.
REFH – Newshub, 21 August 2025
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