MONEY COMMENT
A Big 'No' To CGT On Our Homes

By Jane Mack (TMFJane)
June 24, 2003

According to this week's Motley Fool poll, almost all of the (roughly) 2,500 people who have answered it so far agree that the Chancellor would be stepping over the line if he introduced Capital Gains Tax on the profits from the sale of the roofs over their heads.

I'm not surprised at the response considering that many homeowners are invariably 'mortgaged-up-to-the-eyeballs' and would like to, ultimately, gain from their pain!

Twenty years ago, when I was young, free and single, I bought a house. It was a three-up, two-down terraced house with a bathroom off the back of the kitchen and it took every penny I had. I bought it, not just because I'd got a new job that paid a bit more than my previous one, but also because I had just been dumped by the love-of-my-life. Somehow, buying a house by myself gave me solace because I was, at least, having my first go at being a truly independent woman!

It was good move financially but, nevertheless, when I look back at my naïve and youthful self, I still think I was quite brave to buy a house all by myself at the age of 23. Although it was sometimes a struggle, I was certainly appreciative when I sold it three years later for double the price and used the excess as a deposit for the house my husband and I live in now.

I don't mind saying that we paid £60,500 for it and that we have lived in it since 1986. It was recently valued at around £350,000.

That's a profit on our original purchase price of £289,500.

I'm not boasting when I write about this and, obviously, I'm not being coy either. To be honest, I'm actually a bit, um... scared – mainly because I consider much of that profit to be a sizeable part of our pension pot.

Yesterday, an independent think-tank announced that it thought the best way of easing the pressure on the volatility of the current housing market would be to charge Capital Gains Tax on all house sales profits. To the tune of 40%. It's a move the Government has reportedly been considering quite seriously recently.

If the idea were imposed, in our own case, it would mean we'd have to pay the Government more than £110,000 in CGT if we sold our home at this stage ie: a vast amount of our pension pot (that's assuming that the tax is backdated of course and ignoring things like indexation allowance and taper relief).  

I think that's unfair considering that, over the last 17 years, we have only managed to hang on to our home by making sacrifices. I remember vividly how hard it was to pay our mortgage when interest rates reached 15%! Thank Goodness for lodgers!

Governments can help themselves to our earnings in ever increasing amounts via our taxes and National Insurance Contributions; they can even help themselves to any profits we make on our shares and our savings if they really have to.

But, judging from this week's poll, around 90% of us are against the idea. I have to say I'm in with the crowd on this occasion!

> Vote in this week's poll | More on homeowning and mortgages