Call for CGT on main residences

/ 24 September 2014

Kate Barker, a former member of the Bank of England monetary policy committee, has called for a capital gains tax to be charged on main residences as a way of cutting property inflation. Ms Barker suggested the reform, although politically controversial, is the best way of tackling the UK’s under-supply of housing. “Charging CGT on gains on our main residences would bring the taxation of housing more into line with other assets, and it would tend to discourage over-investment in housing,” she says.

Source: The Guardian

Some muddy thinking here, surely? How could imposing CGT on these gains possibly “tackle the UK’s under-supply of housing”? Especially as Ms Barker also asserts that it would discourage “over-investment” in housing. How discouraging investment in something can increase the supply of it is beyond us. Its main effect (apart from rendering any government that proposed it unelectable for a generation) would be to cause the housing market to seize up: who is going to move house if there is to be added to the already exorbitant cost of SDLT several tens of thousands of pounds of CGT?