Britain’s rental market could shrink dramatically if the government pushes ahead with a capital gains tax (CGT) raid, research shows.
A new study reveals that one million rental homes could be sold in the next decade if CGT is increased.
Chancellor Rachel Reeves is reportedly considering aligning CGT with income taxes – a move that will spark an “exodus” of landlords, the report by Capital Economics warned.
CGT is paid on the profits a landlord makes from selling their property and is capped at 24%. But if this was increased in line with income taxes, higher earning landlords would be left paying out 45% of their profits to the taxman.
Capital Economics estimates the policy would mean 910,000 landlord owned homes would leave the market in the next 10 years.
Currently, a basic-rate taxpayer pays 10% CGT on assets and 18% on property, while a higher-rate taxpayer will pay 20% on assets and 24% on property.
Simon Gammon, managing partner at Knight Frank Finance, said an increase would see a wave of second homes and rental properties put up for sale ahead of any deadline.
Increasing tax on the profits of a property sale would be the latest in a series of punitive tax hikes landlords have faced in recent years.
The removal of mortgage interest relief, scrapping of the 10% wear and tear allowance and introduction of the 3% stamp duty surcharge have eaten into profits, deterring many people from investing in the PRS.
