Proposed Capital Gains Tax Increase Worries Landlord
The government must consider the consequences ...
Posted by Roger Eddowes on 10/10/2024 @ 8:00AM
The UK housing market is seeing landlords rushing to sell their properties, largely driven by anxiety over proposed changes to capital gains tax (CGT) by the new Labour government. The budget is looming ...
Landlords are rushing to sell amid fears of a capital gains tax hike!
Recent data from property website Rightmove indicates that a striking 18% of properties currently for sale were previously rental homes. This figure marks a substantial increase from just 8% in 2010, underscoring the growing unease within the rental sector.
"London stands out with nearly 29% of properties for sale being former rentals!"
Following closely are regions like Scotland and the northeast of England, where approximately 19% of homes on the market have a rental background. Over the past five years, the average proportion of rental properties transitioning to the sales market has hovered around 14%, yet the current surge signals a shifting paradigm that could have far-reaching effects.
While this trend does not necessarily indicate a mass exodus of landlords, it reflects their increasing discomfort amid rising expenses and pressures from legislation!
In recent years, it has become more appealing for some landlords to exit the rental sector than to continue investing. This development raises concerns about a potential reduction in the available rental properties, which could exacerbate the existing supply and demand imbalance. If landlords are incentivised to leave, tenants may find themselves facing even steeper rent prices and some will even find themselves homeless.
This discussion comes amid a backdrop of anticipation ahead of the upcoming budget on October 30, as Prime Minister Sir Keir Starmer warns that it may be a "painful" affair for many. Chancellor Rachel Reeves has not dismissed the possibility of a CGT rate hike, which currently varies from 10% to 24% depending on the asset type, including properties and businesses. Such changes could significantly impact landlords, who already navigate a complex web of increasing costs and new regulations.
I want to express my concerns about the potential repercussions of a CGT hike on the sector by saying that this would be yet another blow to landlords and would have a profound effect on renters. The buy-to-let market has always been an attractive investment with strong long-term returns, but will it remain so?
Nevertheless, as landlords deliberate options amidst these fiscal changes, their decision-making could result in fewer rental properties available for tenants. This diminishing supply may lead to an inflationary spike in rents, ultimately placing a heavier burden on renters.
"They're already grappling with high living costs!"
As the government finalises its budgetary plans, industry experts and stakeholders are calling for a balanced approach that considers the potential consequences on both the rental market and the wider housing sector.
The ongoing dilemma of landlords rushing to sell amid fears of a capital gains tax hike is emblematic of a sector facing significant challenges and uncertainty.
Careful deliberation and foresight are essential.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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