Chancellor, Rachel Reeves, is reportedly considering plans that would see capital gains tax (CGT) introduced on homes sold for more than £1.5m.

Initially reported by The Times, a so-called ‘mansion tax’ would impose CGT on those selling high-value property, even if it is their 'primary' residence.

Currently, when a ‘primary’ residence is sold it is exempt from CGT through the policy of private residence relief, which the Treasury is considering removing on the sale of homes above a threshold, according to reports.

If the rumoured change came to fruition, higher-rate taxpayers would be subject to a 24 per cent tax rate on the value of any financial gain they have made on the value of their home, while basic rate taxpayers would be subject to 18 per cent, if their property was sold for over £1.5m.

Reports stated that discussions remained at an early stage and no decisions have been made, although the Treasury is looking at a range of potential reforms to help fill the hole in public finances.

According to The Times, the reforms would affect approximately 120,000 higher-rate taxpaying homeowners with CGT bills of £199,973.

"The proposed CGT changes, when considered alongside recent inheritance tax reforms and the abolition of the non-dom regime, could be the tipping point that prompts high-net-worth individuals and families to leave the UK," said Taylor Wessing private client group senior counsel, Rachel George.

"While much has been said about a potential exodus, it hasn’t yet materialised on quite the anticipated scale.

"This move is likely to drive out the most mobile individuals, those with global flexibility, who may now reassess their ties to the UK. It also adds to the growing sense of uncertainty in the property market, which is already seen as volatile due to frequent shifts in tax policy.

"Introducing yet another tax regime increases uncertainty in the property market at a time when the UK is already seen as being somewhat erratic."

Canada Life retirement income director, Nick Flynn, added: “Introducing CGT on first homes over a certain threshold will penalise older homeowners who have lived in their property for many years and are seeking to downsize.

“Many pensioners have very modest incomes, despite living in properties that have appreciated in value over the years. These individuals may need to rely on their properties to help fund retirement costs, particularly given the prevalence of under-saving into pensions.

“Taxing main residences will limit people's options, discouraging mobility in the housing market and freezing people in homes that are larger than they need - running counter to wider housing policy objectives."

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