Broker warns CGT remains a barrier to sales despite Healey ruling out increase
The Chancellor has dismissed speculation that capital gains tax (CGT) will be increased in next week’s Autumn Budget.
The move, first reported by The Times, ended speculation of a CGT rise, despite calls from some Labour MPs, including First Secretary of State Louise Haigh, for the tax to be increased.
While the decision has been welcomed by the sector, some industry figures have argued that the existing CGT burden continues to create challenges for landlords.
Gaurav Ladhar (pictured), managing director of Landmark Specialist Finance, said the current level of CGT can still make it difficult for landlords to sell properties, even without a further increase.
He said: “Even with no increase, the current level of capital gains tax can make selling difficult. If you have held property for 15 or 20 years and built up a substantial gain, the tax bill on a sale can be significant.”
Ladhar added that landlords who own property in their personal names may be discouraged from selling as a result.
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“This can discourage them from selling and potentially leave some feeling stuck with assets they might otherwise want to move on from,” he said.
He noted that some landlords may consider incorporation as an alternative, with the Ramsay ruling relevant to whether a property letting activity qualifies as a business for incorporation relief. However, he cautioned that it is not a straightforward solution.
“It is not an automatic solution; the facts and the tax rules matter, so landlords need specialist advice before making a decision,” he said.
Industry response
The National Residential Landlords Association (NRLA) has called for CGT to be overhauled to stimulate investment as rental supply shortages outstripped demand.
Meanwhile, analysis from The Lettings Partnership suggested landlords have avoided a significant increase in tax liabilities following the Chancellor’s decision.
Under current rules, a higher- or additional-rate taxpayer would face an illustrative CGT bill of £17,866 on a property gain.
Had CGT been aligned with income tax rates, that bill could have risen to £29,777 for higher-rate taxpayers paying 40% and £33,499 for additional-rate taxpayers paying 45%, representing increases of 66.7% and 87.5% respectively.
Chris Mason, chief operating officer at The Lettings Partnership, said: “The Chancellor’s decision not to pursue an increase in capital gains tax will come as a welcome relief to landlords, particularly those who have seen the value of their investment properties increase substantially over the last decade.
“The decision to reject calls to raise CGT is a welcome step in the right direction, but landlords need more than the avoidance of further tax increases. They need a stable and supportive environment that gives them the confidence to remain in the sector and continue providing much-needed rental homes.”
