A report commissioned by the government suggests a doubling of Capital Gains Tax on profits from the sale of second homes.
The government - which received the report yesterday from its own Office for Tax Simplification - is keen to stress no decision has yet been taken about whether to implement the proposal.
About £14 billion could be raised by cutting exemptions and doubling rates, according to the review, which was set up by Chancellor Rishi Sunak.
In July Sunak asked the OTS to carry out a review of CGT to “identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent.”
In particular, Sunak wanted a probe into "the acquisition and disposal of property" and "the practical operation of principal private residence relief".
Now the OTS says the tax could be doubled, made simpler in its structure, and brought roughly in line with income tax.
"The disparity in rates between Capital Gains Tax and income tax can distort business and family decision-making and creates an incentive for taxpayers to arrange their affairs in ways that effectively re-characterise income as capital gains" the report claims.
The OTS’s consultation - which received over 1,000 responses - revealed a range of areas in which Capital Gains Tax is apparently counter-intuitive and creates "odd incentives." Some respondents argued that CGT is a barrier to economic growth, others that it is a barrier to a more equitable society.
The government is under no obligation to implement the recommendations and a spokesperson for the Treasury says: "The government's priority right now is supporting jobs and the economy. We thank the OTS for their independent report which will be considered in due course.”
A second element to the OTS report, which will follow early next year, will explore technical and administrative issues.
Only 265,000 people pay tax on capital gains each year; the report suggests 50,000 of those arrange their financial affairs so the CGT liability comes under the £12,300 exemption allowance which each person has under current tax rules.
The OTS claims most capital gains are concentrated among relatively few taxpayers paying "proportionately less" tax than the rest of the population.