Chancellor Rachel Reeves eyes capital gains tax hike to 39%

Chancellor Rachel Reeves could hike capital gains tax to a whopping 39%, according to The Guardian.

The newspaper reports the Treasury is testing a range of 33%-39% for capital gains tax to fill in the so-called £22 billion black hole in Britain’s finances.

Propertymark warns raising capital gains tax could jeopardise growth in the housing sector.

Complete disarray

Former chancellor Jeremy Hunt cut the higher rate of capital gains tax from 28% to 24%.

However, Ms Reeves has refused to rule out an increase and previously told Bloomberg TV she wants to “strike the right balance.”

According to the Guardian, Treasury internal modelling suggests raising capital gains tax could bring in extra revenues of around a billion pounds.

A senior source at the Treasury revealed to The Guardian: “Some very big tax decisions are being left until very late in the day.” Another insider suggested the Treasury’s tax-raising plans were in “complete disarray.”

In response, a Treasury spokesperson denied the claims of disorder to the Guardian, stating, “These claims are inaccurate,” and emphasising that they do not comment on “pure speculation” concerning specific tax measures before the budget.

Reduce the number of property transactions

Propertymark has urged the government not to increase capital gains tax following an interest rate cut.

The Bank of England cut interest rates from 5.25 to 5% in August for the first time in four years which was welcomed by many in the property sector.

Richard Worrall, NAVA Propertymark, said: “The Bank of England cutting interest rates should help stimulate growth in the housing market, which is fantastic news for those who are hoping to purchase their next home.

“However, if the Chancellor increases the higher rate of Capital Gains Tax, this could reduce the number of property transactions on the market at a time when full confidence needs to be restored to the housing market, especially when encouraging housing growth is a central part of the new UK government’s mission.”

Director of Benham and Reeves, Marc von Grundherr, warns the capital gains tax hike could see landlords leave the market.

He said: “Buy-to-let landlords have been targeted by a number of laws and legislative changes over recent years, all designed to reduce the profitability and tempt more landlords to quit the sector, thus, in theory, freeing up more stock for owner-occupier homebuyers.

“However, our new Labour government has made it very clear which side of the fence they wish to sit, first with the introduction of the Renters’ Rights Bill, with it looking likely that further tax hikes are on the way in the Autumn Statement.

“It remains to be seen just what these tax changes will entail but any further attack on landlords is only likely to see private rental stock levels reduce further, exacerbating the rental crisis in the process and driving rents ever higher at the expense of tenants.”