Streeting’s CGT plan: what over-55 homeowners need to know

What Streeting is proposing

Wes Streeting has proposed aligning capital gains tax (CGT) rates on property with income tax rates. Under the proposal, CGT on residential property would rise from the current rates of 18% (basic rate) and 24% (higher rate) to 20%, 40%, and 45% — matching income tax bands.

The proposal remains at the consultation stage and has not been legislated. However, analysis published alongside the proposals suggests the changes could have significant effects on property markets and tax receipts.

How the numbers change

For a higher-rate taxpayer selling a property with a £200,000 gain, the difference is substantial.

For additional-rate taxpayers, the proposed increase from 24% to 45% on the same £200,000 gain would produce a liability of £90,000 versus £48,000 today.

The housing market freeze risk

A concern raised in analysis accompanying the proposals is the risk of a behavioural lock-in effect. When a CGT rise is announced but not yet in force, property owners who might otherwise sell are incentivised to either bring forward a sale to beat the new rates, or defer indefinitely to avoid the higher liability.

Analysis has cited the Australian experience, where a similar CGT announcement in the 1990s led to a significant and prolonged reduction in property transactions. The prospect of a freeze in supply could affect a range of homeowners beyond those directly subject to CGT — including those seeking to downsize or move to smaller properties.

Which assets are and are not affected

The proposal does not change the treatment of primary residences. Your main home remains exempt from CGT under Private Residence Relief. The assets affected by a CGT rate change would be:

• Second homes
• Buy-to-let investment properties
• Inherited properties that have not been used as a main residence
• Investment assets where gains have accrued

For homeowners whose significant wealth is in their primary residence, a CGT rate change has no direct effect. However, for those who also hold other property assets — a category that covers a significant proportion of over-55 homeowners — the implications are worth understanding.

What this means for over-55 homeowners with non-exempt property

If you hold a second property, a buy-to-let, or an inherited property with accrued gains, the prospect of a CGT rate rise introduces a time dimension to any decisions about restructuring your property holdings. Whether and when to sell, transfer, or otherwise deal with those assets is a question with a tax component that may look different under a new rate structure.

For those whose wealth is primarily in their main home, equity release remains unaffected by CGT proposals — it does not involve selling the property and does not trigger a CGT event. Verity Home provides information on the range of later-life lending products available to homeowners aged 55 and over.