Chancellor Rachel Reeves is reportedly considering a capital gains tax (CGT) on primary residences worth more than £1.5 million, a move experts tell Spear’s they fear could push more high-net-worths individuals to leave the UK.
Main residences are currently exempt from capital gains tax, a charge on the increase in the value of an asset when it is sold. The government is considering removing this relief for homes above £1.5 million, according to The Times. The current rates are 24 per cent for higher-rate taxpayers.
The change would subject those with properties that fall into the IHT net to a double tax whammy, and risked creating a ‘liquidity’ trap, top tax lawyers said.
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CGT on main residences would represent a seismic shift in UK tax policy, redefining what the UK considers ‘wealth’, Spear’s Recommended Richard Bate, head of private wealth at Weightmans told Spear’s.
‘CGT has always targeted deliberate gains, so applying it in this way breaks a long-standing social contract that defines the family home as a personal asset, not an investment,’ Bate said.
Bate added the reported proposals could create a liquidity trap, ‘where paper gains driven by inflation or market movement are taxed, rather than real wealth creation’.
The final nail in the tax cofin?
The UK government unveiled a series of significant inheritance tax (IHT) changes last year, setting new caps on Business Property Relief (BPR) and Agricultural Property Relief (APR), and freezing the IHT nil rate bands until 2030. These changes set out by Reeves in the autumn Budget 2024 are expected to bring many more estates under the IHT net.
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There has been significant criticism of the IHT proposals, particularly from the business and farming community, but draft legislation published last month appeared to show the government is determined to push ahead with its IHT overhaul.
The introduction of further punitive tax changes could be the final push for Britain’s wealthy, argued Bate.
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‘For high-net-worth individuals, the introduction of CGT on a valuable main residence may be viewed as yet another incentive to consider relocating away from the UK,’ he told Spear’s.
In a slither of light, Reeves is reportedly considering abolishing stamp duty. The top rate of SDLT – on properties of $1.5 million or more – for a non-resident buying a residential property in England or Northern Ireland can be as high as 19 per cent after changes brought in last November.
The Treasury has collected £732 million in Capital Gains Tax (CGT) through the first four months of 2025/26, a 11 per cent increase of £75 million compared to the same period in the previous financial year (£657 million), figures released on Thursday showed.
CGT receipts are estimated to reach £25.5 billion per year by 2029/30 – nearly twice the current level.
HMRC’s latest update also showed that Inheritance Tax (IHT) receipts recorded a total of £3.1 billion through the first four months of 2025/26, an increase of £229 million (8 per cent) compared to the same period in 2024/25 (£2.8 billion).
Simon Martin, head of UK technical services at Utmost Wealth Solutions said: ‘With public finances under strain, given the rumours currently circulating, it would appear increasingly likely that the chancellor will look at the Inheritance Tax regime yet again at the upcoming autumn Budget.
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‘A careful balance would need to be struck between further revenue-raising measures and any additional loss of confidence in the UK following some of the recent reported outflows of wealth.’
The proposals also risk baby boomers ‘house blocking’ the supply chain.
‘Homeowners with properties valued above the threshold may choose to stay put and take their chances with inheritance tax instead,’ Bate said.
‘This could lead to increased demand for equity release, as older homeowners look to unlock value from their homes without having to sell.’
Spear’s Top Recommended tax layer James Ward, head of the private client practice at law firm Kingsley Napley, added: ‘Instead of looking to downsize and pass assets to the next generation, we may see the older generation sitting tight in their property for the next few years to see how the political landscape unfolds in 2029.’
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Don’t let tax changes derail succession planning
Ward said Kingsley Napley had received an uptick in enquiries from clients concerned about the potential tax implications of October’s budget.
He said he has told them to take ‘sensible and significant steps’ to help mitigate tax rises, including ‘gifting assets and considering the use of trusts.’
‘I tell my clients not to let tax dictate their whole succession policy and to consider what is best for the next generation and the one below,’ he said.
Bate added: ‘It’s an unpredictable tax landscape. Where it’s affordable, taking advantage of existing reliefs to transfer wealth to the next generation is a sensible step. Trusts can offer a way to do this while reducing the risks of passing assets to beneficiaries who may not yet be ready to manage them.
‘This won’t necessarily eliminate future CGT liabilities on a house sale, but it could reduce the need to sell in the first place.’