Tax rising house prices to pay for the COVID-19 crisis, think-tank proposes

Tens of billions of pounds of new taxes should be levied on increases in the value of homes to ensure the costs of the COVID-19 pandemic do not fall unfairly on younger people, a think-tank report is suggesting.

The report from the Social Market Foundation (SMF) warned that without radical action to raise significant extra tax, the UK faces an unsustainable national debt and stagnant growth that will “blight the lives of future generations”.

To help avert this, the report suggested that the Treasury should raise £421bn over the next 25 years by imposing a new “Property Capital Gains Tax” on all homes sold in the UK, and that the tax could be set at 10% of the increase in the value of the property since it was last sold.

The SMF report also said that the fairest place for the Treasury to levy new taxes is “unearned” gains on residential property. Taking account of mortgage debt, the think-tank highlighted that equity in UK homes is worth more than £5trn pounds – a figure that has more than doubled in the last 20 years.

Chancellor, Rishi Sunak, last week ordered a Treasury review of capital gains tax, looking at how capital gains are taxed compared to other types of income.

Levying a new tax on the gain in property prices when sold would raise £629bn for the Treasury over 25 years, the report estimated, and the think-tank also suggested that some of this should be used to abolish stamp duty and inheritance tax on property – leaving the Treasury with £421bn to repair the public finances.

SMF director, James Kirkup, commented: “These reforms are bold, far-reaching and could be politically controversial: the older voters who own most British property are a powerful group.

“But the scale of the coronavirus crisis and the unprecedented outlook for the public finances mean that responsible politicians of all parties must be prepared to embrace new ideas and take bold action.

“Failure to act risks severe economic and social harm. A post-crisis era where the costs of the crisis fall more heavily on the young than the old could strain the social contract between the generations to breaking point.”

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