Reeves cautioned about the three ways that a property tax shake-up might hurt first-time homebuyers

In the next budget, Rachel Reeves is reportedly targeting high-end property taxes, but there are worries that a change could inadvertently hurt those who are attempting to climb the housing ladder

Changing the way property is taxed in an attempt to target wealthy homeowners and buy-to-let properties could make things worse for first-time buyers, according to chancellor Rachel Reeves.

Coventry Building Society, a major mortgage lender, is warning that proposed tax reforms could backfire on first-time buyers as the Budget is less than two months away.

The chancellor reportedly has several reforms pertaining to home ownership under consideration.

The changes may appear to be aimed at buy-to-let landlords and wealthier homeowners, but they could have an impact on the entire housing chain, making it more difficult for prospective buyers to climb the property ladder.

In a different post, we examine whether this is a good time to purchase a home.

According to The Guardian, one proposal being considered is to eliminate stamp duty for purchasers and substitute it with a new property tax on sellers of homes valued at over £500,000.

Additionally, CityAM is considering plans to allow homebuyers to pay stamp duty in installments instead of paying it all at once.

According to the Times, there was also a proposal to eliminate the capital gains tax (CGT) exemption for primary residences over specific thresholds. This would result in higher-value home owners receiving substantial additional bills upon selling their properties.

The Times also speculated that Reeves is thinking of expanding National Insurance to cover the tax on rental income.

The head of mortgage relations at Coventry Building Society, Jonathan Stinton, cautioned that although these changes don't appear to affect first-time buyers, there may be significant hidden repercussions.

"When you shake the top of the ladder, the impact is felt all the way down," he said, adding that any reform must be carefully considered to prevent problems for those who need it most.

How first-time buyers might be harmed by property tax changes.

Stamp obligation.

If there are no homes to purchase, shifting stamp duty from buyers to sellers seems like a huge win for first-time buyers because it eliminates a significant upfront expense, but it is a meaningless win.

"Top-end sellers may decide to remain in their current location if they receive larger tax bills. As a result, there may be fewer starter homes available on the market and fewer family homes available for purchase. Therefore, it might be more difficult to find the ideal home even though the upfront costs might be lower," Stinton said.

For first-time buyers, other possible plans that would enable them to pay stamp duty in installments could lessen the initial high upfront cost burden. Nevertheless, Stinton noted that it might also force them to pay an additional monthly fee, which would reduce their overall affordability.

Tax on capital gains.

CGT taxation on primary residences could make downsizing a costly problem rather than a wise financial decision. When confronted with a large bill, many homeowners may decide to stay put, further restricting the supply of family homes available for purchase. It could also make the Bank of Mom and Dad weaker. Children and grandchildren frequently receive the money that older homeowners unlock when they downsize to assist with deposits, according to Stinton.

Should the tax collector take a sizable portion of a sale's proceeds, it might be more difficult for the following generation of buyers to obtain the funding they have been relying on.

According to estimates from estate agency Savills, over half of first-time homebuyers last year received financial assistance from their family.

According to the report, buyers received an average of 55,572 in loans and gifts from the so-called Bank of Mum and Dad.

Rental income national insurance.

If rental income is subject to National Insurance, landlords may have to decide whether to sell out or pass the expense on to their tenants.

On the one hand, those wishing to start their real estate career now may find more opportunities if landlords sell up.

Any additional decrease in the number of rental properties available, however, is likely to push up rents for anyone attempting to save deposit money.

Additionally, some landlords might raise rents retroactively before the regulations take effect because of the upcoming Renters Rights Bill. That makes it even more difficult for first-time buyers to set aside money each month for a deposit, according to Stinton.