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Capital Gains Tax Increase? How Will Landlords Be Affected?

Posted March 23rd 2021

While most of the property market focus on the Government, and the March Budget, relates to the stamp duty holiday, and any extension, there are other matters to consider.

At Thomas Morris, we want to keep you fully informed of changes which impact your business. We also want to ensure you make informed decisions, and that if you have any questions, we do our best to answer them.

Will CGT impact you?

Possible changes to Capital Gains Tax (CGT) have concerned many landlords.

The survey of 1,100 landlords carried out by Find Out Now (10th February 2021 asked the question; “Are you worried that Capital Gains Tax will be increased in the March budget?”

52% of respondents said NO, with 48% of respondents answering YES.

The survey also asked; “Are you planning to sell your buy-to-let portfolio before a potential increase in Capital Gains Tax?”

  • 57% of respondents said; “I will stick with my investment”

  • 23% of respondents said “I will wait and see what is announced”

  • 13% of respondents said “I am considering selling”

  • 8% of respondents said “Yes, I am currently selling”

What might change with CGT?

If the recommendations made by the Office of Tax Simplification is followed, higher rate tax payers who sell a buy-to-let property (or an additional home) would see their CGT bills rise from 28% to 40%. This would be costly for many landlords.

For landlords on the basic rate of tax, there would be an increase from 18% to 20%. This is not as significant a rise, but anything which costs people money is rarely welcome.

The Office for Tax Simplification has also recommended a significant reduction in the Annual Tax Allowance. This currently stands at £12,300; but it could be reduced to £2,000.

Overall, the recommendation is for CGT to come into align with income tax rates, and this could see it rise to 45%.

James Forrester, a known name in the UK property market, commented: “Buy-to-landlords have been hit hard by the government in the past few years, and now they have something new to worry about. 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 changes would likely result in landlords prioritising annual income from their investments rather than capital growth, which could see investors target regions of the country with high rents compared to house prices.”

If you would like to arrange a valuation of your property, even in these challenging times we can provide this service. We can currently provide a range of safe property and lettings market services, aimed at helping you make an informed move.

If you are looking for help with any matter of the property or lettings market, it is best to speak to property professionals. You can book a sales or rental valuation appointment directly on line at a time and date of your choice by clicking here or alternatively click here for individual branch contact details.