Capital Gains Tax rates unchanged for landlords in Budget

Landlords will not face an increase in Capital Gains Tax (CGT) liabilities following confirmation that Chancellor John Healey will not raise rates in next week’s Budget, according to reports.

Analysis by The Letting Partnership examined the potential financial impact had CGT been aligned with income tax rates. The research found that the average home value in Britain increased from £198,169 in July 2016 to £272,611 by July 2026, representing a gain of £74,442 over the decade.

Under current rules, a landlord paying higher or additional rate income tax would face a CGT liability of £17,866 on this gain, based on the current 24% rate and excluding any CGT allowances.

Had CGT been aligned with income tax rates, the liability for a higher-rate taxpayer could have increased to £29,777 at 40%, an additional £11,911, equivalent to a 66.7% increase. For additional-rate taxpayers, a move to 45% could have seen their CGT bill climb to £33,499, an increase of £15,633, or 87.5%.

Basic-rate taxpayers would have also faced an increase, with the liability on the same capital gain rising from £13,400 at 18% to £14,888 at 20%, an additional £1,488 or 11.1%.

Regulatory pressures persist

The Letting Partnership noted that landlords are already preparing for changes to property income taxation from April 2027, when separate tax rates on rental income will increase by two percentage points, alongside the continued expansion of Making Tax Digital requirements.

These financial pressures come against the backdrop of the Renters’ Rights Act, which introduced changes to the private rented sector on 1 May this year, including the abolition of Section 21 no-fault evictions and the transition to periodic tenancies.

Further requirements include the rollout of the new national landlord registration system from December 2026, bringing additional responsibilities for landlords as they continue to adapt to the new regulatory landscape.

Market implications

While the decision not to increase CGT will provide some relief to landlords, concerns remain about the cumulative impact of taxation and regulation on landlord confidence and the supply of rental homes. The property market has already seen significant pricing adjustments across England, reflecting broader market pressures.

Chris Mason, Chief Operating Officer at The Letting Partnership, said: “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.”

The announcement comes as the property sector continues to navigate evolving market conditions, with regional variations in transaction speeds highlighting differing levels of market activity across the UK.