A Solicitor’s Warning: Taxing the Family Home Risks More Than Revenue

For most people, their home is far more than bricks and mortar, it represents stability, identity, and financial security.  Removing the CGT exemption on primary residences risks transforming the family home into something it was never meant to be: a taxable investment. 

Presented as a pragmatic solution to fiscal pressures, such a reform may seem sensible in Treasury models. But in practice, it could have devastating consequences for ordinary homeowners, distorting the housing market and eroding public trust.  

Who Would Be Hit the Hardest

At Parfitt Cresswell, we work with clients across London and the Southeast, from families and professionals to retirees, and the reality is clear. These are not speculators or landlords sitting on portfolios. They are people who bought their homes decades ago in areas that have since seen significant appreciation.

A home worth £1.5 million today does not make its owner wealthy in liquid terms. Many are asset-rich but income-poor. To tax their main residence as a capital gain would be to penalise long-term stability and prudent ownership.

A Principle That Has Stood Since 1965

The exemption for principal private residences has survived governments of every persuasion since its introduction in 1965. It reflects a simple but vital social contract: a home is a place to live, not a financial instrument.

That principle supports mobility and fairness. It allows people to move for work, downsize as they age, or relocate for care without fear of being financially trapped by tax liabilities. Removing it would change that dynamic entirely.

Real-World Consequences

The effects of such a policy would be widespread:

• Mobility would decline — homeowners could delay or avoid moving altogether.

• Estate planning would suffer — family transfers might trigger unexpected tax bills or forced sales.

• Retirement funding would erode — many rely on releasing equity from their homes later in life.

These are not hypothetical scenarios. They are real concerns voiced daily to our team in legal consultations, and they illustrate how far-reaching the implications could be.

An Administrative and Economic Minefield

Even leaving aside fairness, the logistics are daunting. Calculating CGT on homes purchased 30 or 40 years ago, often without full records of improvements, would create endless disputes. HMRC and the courts would face a surge of complex valuation and documentation cases.

Moreover, any reduction in market activity would have knock-on effects: fewer transactions, less stamp duty, and reduced confidence. The policy could well raise less revenue overall than it aims to achieve.

Trust and the Social Fabric

Perhaps the most damaging outcome, however, would be the erosion of trust. Homeownership has long been encouraged as a pillar of personal responsibility and financial independence. To now redefine it as a taxable investment would send a troubling message, that decades of careful ownership are no longer valued by the state.

The family home anchors individuals, families, and communities. It underpins wellbeing, stability, and intergenerational continuity. A policy that treats it as mere capital undermines not just personal finances but the broader social fabric.

A Call for Perspective

The government’s desire to balance the books is understandable. But this must not come at the cost of punishing ordinary homeowners and destabilising the housing market.

Taxing the family home may appear to promise short-term revenue gains, but the long-term consequences for trust, mobility, and economic confidence would be far greater.

Now, more than ever, policymakers should remember what is truly at stake.

Teresa J Payne, Group Director of Parfitt Cresswell Solicitors