An influential think tank has been criticised for recommending the introduction of a 40% capital gains tax (CGT) on house sales as a way of restricting house price inflation and encouraging new build housing.
The report from the Social Market Foundation said that borrowers should pay up to 40% in CGT when they sell their property and also pay an annual tax based on the value of their homes. It hopes this would encourage people to sell their property as prices go up to minimise their tax bill, and also reduce the amount of money borrowers had to buy their next home.
The report is similar to a recent study from the Treasury, which also mooted tax increases to control prices. However, it concluded that this new tax could be offset by decreasing or even abolishing council tax or stamp duty.
Alex Bannister, group economist at Nationwide, commented: ‘The issue is whether it makes it more difficult to move house and move up the property ladder. If it is costly to move but does not dampen property prices it could damage flexibility in the economy.’