British homeowners have enjoyed an untaxed wealth of 3 trillion pounds ($4 trillion) from rising property values over 20 years.
This is unlikely to happen again, with most riches going to the wealthy, those over 60, and those who live in London.
The Resolution Foundation reported that gains should be taxed in a report. It stated that the rise in house prices from 2000, which has made many homeowners millionaires, was “primarily driven by falling interest rates.”
The research group estimates that house prices have increased by 86% faster than inflation in the last millennium. This has resulted in 3 trillion pounds of capital gains for homeowners’ main residences. Gains on the first home are exempt from tax under current laws.
The wealth of those already wealthy was increased by the property boom in Britain.
Source: Resolution Foundation
The resolution stated that “Though this tax treatment has been largely a matter for political consensus in Britain over the recent decades,” Resolution added. These gains are “unequal and unearned” and not taxed.
The wealth has not been distributed equally. Existing homeowners were the ones who benefited the most, especially those who bought in the late 1990s or early 2000s.
On average, the least wealthy third of households earned less than 1,000 pounds per person, compared to 174,000 for the richest tenth. The average income of those over 60 was around 80,000 pounds while that of those under 40 earned less than 20,000.
The average increase in principal residence value in London was 76,000 pounds between 2000 and 2000. It was only 21,000 pounds in North East England. While some of the rises are due to home improvements, “the vast majority,” is simply due to house-price inflation.
This large windfall should convince policymakers to “revisit long-held attitudes” regarding the taxation on primary homes. The Chancellor of Exchequer Rishi Sonak increased taxes on incomes and profits of businesses to reduce borrowing. This brought the national tax burden to its highest level since the 1950s.
The resolution stated that the U.K. could reduce the tax burden by introducing a capital gains tax on first homes. This follows the lead of Sweden, Portugal, and the U.S.
A 28% tax rate and a 75,000-pound tax-free allowance per property per person would protect 60% of the population while raising 4 billion pounds. Alternative options include reforming inheritance tax reliefs.
If anyone reads this article found it useful, helpful? Then please subscribe www.share-talk.com or follow SHARE TALK on our Twitter page for future updates.
Terms of Website Use
All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned