The chancellor Rishi Sunak will aim to use his Budget announcement next month to try and start sorting out the nation’s finances, and speculation is rife that capital gains tax will increase, leaving buy-to-let landlords concerned that they face paying more if they decide to sell-up.
New research, by Barrows and Forrester, found that almost half – 48% – of 1,100 landlords polled are worried about the potential increase to CGT.
The government’s Office for Tax Simplification recently came up with a number of proposals to reform capital gains tax in a report. Its main principle recommendation is to apply the same tax rates to both income and capital gains.
As it stands, there are a myriad of rates that people pay, with capital gains tax ranging from 10% for basic-rate taxpayers to 20% for top-rate taxpayers for normal assets.
For property sales – investment properties, rather than a main home – it ranges from 18% to 28% for top-rate taxpayers.
Meanwhile, the top tax rate for income is 45%, increasing to 47% if national insurance is also considered.
James Forrester, managing director of Barrows and Forrester, said: “Buy-to-landlords have been hit hard by the government in the past few years, and now they have something new to worry about.”
Tax and regulation changes have hit landlords’ profits over the past few of years, following mortgage interest relief changes, the scrapping of the ‘wear and tear’ allowance and the introduction of the 3% stamp duty surcharge.
Forrester continued: “They’ve already had to cope with the 3% stamp duty surcharge, as well as a reduction in mortgage income tax relief, so perhaps landlords are numb to this latest nail in the coffin, although it remains a worry for nearly half.”
The majority – 57% – of landlords surveyed plan to stick with their investment whatever happens, while a quarter – 23% – are taking a wait and see approach.
Some 13% are considering selling, while 8% are currently in the process of selling up.
“Landlords will be keeping a close eye on these potential changes to CGT, which could have a sizable impact on the state of the housing market,” Forrester added
Old saying “You don’t give a dog a bone and then take it back again” of course landlords will be concerned and then when it happens angry.
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This would be a nail in the coffin for new BTL investors. I only see someone who was shortly going to cash-in will accelerate their exit from the market, landlords who are already in for the long term will stick and pray for sometime in the future, better news. Meanwhile rents are likely to climb if the trend is to tax higher.
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