Craig Mackinlay is Member of Parliament for South Thanet.

It is estimated by the Resolution Foundation that there are 3.4 million people across the country who own a second home not for rental, either used as an occasional holiday retreat or simply remaining empty as an investment. Any reason for selling up has been made unattractive by the residential rate of Capital Gains Tax, with an eight per cent surcharge over usual CGT rates for most other gains. For those with income and gains above the higher rate threshold (£46,350 for 2018/19), this is now set at 28 per cent following George Osborne’s budget of 2016. Cumulative income and gains arising below the higher rate threshold are taxed at 18 per cent. Therein is the tax problem – the tax avoidance measure is simply not to sell. Ever.

The backlash against second property ownership is growing, with St Ives in Cornwall banning the building of second homes and the threat of a five-fold council tax on second homes in the Yorkshire Dales. As a Conservative, whilst I can clearly understand the problem of second property ownership, let’s not immediately demonise an individual’s choice of assets – that way lies Corbynomics, a government which might just decide that the savings you have in the bank or invested in equities isn’t really fair and would be better used by others.

Why not come up with a compromise way out to encourage the sale of these second homes without the penal tax charge, which for anyone considering their tax position makes no sense of ever selling? Let me explain the tax conundrum that the Chancellor would be well served to address in this year’s Budget.

I can but imagine there are many hundreds of thousands of holiday home type properties held by older owners. Most are likely to be smaller properties ideally suited to the first time buyer, often in locations where local residents have been priced out. Certainly sounds like the problem faced in many of the tourism locations around the country.

Let us take a typical example and tease it apart. A widow lives, as she always has, in the town where she worked and the children were brought up. It is some miles away from the holiday home, a purchase by the sea, perhaps in the 1970s or ’80s when the family was young. She never visits the holiday home anymore, it’s a little too far away, the memories of those happier times still a little too raw; she doesn’t want to rent it out (it might get ruined), and, besides, it’s now looking a little dated. The avocado bathroom suite isn’t really high on the AirBnB or rental tastes any longer. With a historic purchase price of just £20,000, obviously half of the property has uplifted her husband’s probate value but it has a current market value of £200,000, shouldn’t she simply sell and get rid of the worry, the annual insurance and all the rest?

The simple answer is that she’d be mad to, in tax terms. Say her husband died a few years ago when the property was worth £100,000; she’d be sitting on a revised historic cost of £60,000 and a gain of £140,000. She has income of, say, £20,000 per year. Her CGT, after Annual Exemption, would be a hybrid of the 18 per cent and 28 per cent rates, and would saddle her with a CGT bill of £36,565. So what? you might ask, but should she have a taxable estate for IHT purposes, that remaining cash after the transaction of £163,435 could be taxed upon her demise at 40 per cent, so an effective rate of 51 per cent arises on the double tax of CGT then IHT. For higher rate taxpayers bearing CGT at 28 per cent on the second home sale, the combined CGT with IHT comes to a rather unpleasant 56 per cent. For those, admittedly the majority, who do not have an estate liable to IHT, then the tax that could be avoided, simply by not selling and leaving the second home upon death, could be up to 28 per cent. Leaving the empty property as part of a non-taxable estate allows the property to pass to descendants at zero per cent

If the tax on selling the second property was not so punitive, in many cases it would be sold – to a first time buyer perhaps, a local couple maybe, and the cash derived would in many cases be passed down to children or grandchildren to get them started on their own home owning ladder. Or perhaps there’d be the opportunity of a later in life spend up, and why not.

All outcomes would have a beneficial effect on the economy, the housing market and the family. The Chancellor must recognise this and consider meaningful exemptions to prevent the double tax trap and liberate a huge number of properties onto the market. Might save a few green spaces as well as invigorating many areas with permanent residents rather than the occasional visiting temporary resident.