top of page

What a Capital Gains Tax review could mean for homeowners

  • Writer: Mortgage Tree
    Mortgage Tree
  • Jul 17, 2020
  • 2 min read

Everything you need to know about the Chancellor's capital gains tax review and what could change...


This week the government announced it was undertaking a review of the capital gains tax system to ensure it is “fit for purpose”.

The Chancellor has asked the Office of Tax Simplification for proposals “on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income.”

While the Treasury say this is standard practice, commentators have warned it could lead the way to “a tax grab” in the autumn.

“It would be naive to assume the chancellor didn’t have his eye on tweaking taxes to refill his coffers,” Nathan Long, analyst at Hargreaves Lansdown, told the BBC this week.


What is Capital Gains Tax?


Capital gains tax (CGT) is payable when you sell an asset that has increased in value since you bought it. It is a tax on the profit you make.

In large, it applies to gains made on property and shares. The Office for Budget Responsibility forecast that in 2019/20 CGT would raise around £9.1bn, which is about 1.1% of all tax paid in the UK.

The rate varies based on a number of factors, such as your income and size of gain. For residential property, it may be 18% (if you are a basic rate tax payer) or 28% (if you are a higher rate taxpayer) of the gain (not the total sale price). It’s only the gain that is taxed.


How could changes affect homeowners?


Currently, our main home (or primary residence) is exempt from CGT on the gains made when we sell. As a result, most of us will never have to pay CGT. According to the Resolution Foundation, only 0.5% of UK adults currently do.

But with this review, the government could look at removing the CGT exemption when homeowners sell their main home.

However, commentators suggest the hostility this would receive makes it unthinkable under a Conservative government.

It would also run counter to recent government changes aimed at getting the property market moving again, such as the stamp duty holiday.

But second homes and buy-to-lets may be a target for greater taxation and more acceptable politically. The CGT rate could be aligned with income tax rates – at 20%, 40% and 45% – meaning that the tax take on buy-to-let disposals would rise sharply. The knock on effect of this though, is that landlords and holiday home owners may sit tight rather than selling up, and the move may act to further stagnate housing transactions.

The government could also abolish or change the current £12,3000 annual CGT-free allowance.

Basically, everything is on the table, so watch this space! With a government manifesto commitment to not raise income tax, National Insurance or VAT, the Chancellor has very few options for raising the income needed to pay for coronavirus recovery measures.




 
 
 

Comments


Sign Up To Our Newsletter

Stay Connected...

Our Address...

Mortgage Tree

Blake House

18 Blake St

York

YO1 8QG

01904 263012

Mortgage Tree - Mortgage Advisors York - Services & Standards

Mortgage Tree offers a nationwide mortgage broking service from our base near York, North Yorkshire. We specialise in mortgages and insurance. Whether you are a first time buyer or you are a buy to let investor with multiple properties, Mortgage Tree will ensure that you get the most suitable products available.

We are a Whole Of Market broker which means that we will choose the most suitable mortgage for you from the hundreds available on the UK mortgage market. Our network also gets specially discounted deals from lenders which are available to our network.

 

We also provide insurance cover that will give you & your loved ones a blanket of protection that is so vital. We will endeavour to give you the best service that we can at all times.

Jason Gentles t/a Mortgage Tree  (FCA No. 502275) is an appointed representative of Julian Harris Mortgages Ltd (FCA No. 304155), which is authorised and regulated by the Financial Conduct Authority.

The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at www.financial-ombudsman.org.uk

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Please note that some mortgages such as commercial BTLs are not regulated by the FCA.

The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK.

© 2025 Mortgage Tree  |  Web Design by Studio.END

bottom of page