The tax is widely expected to be increased by the Chancellor in the Autumn Budget on 30 October
A new era of ‘landlord prisoners’ will emerge if the mooted rise in CGT goes ahead in the Autumn Budget, experts have warned.
The tax is widely expected to be increased by the Chancellor in the Autumn Budget on 30 October.
Ben Perks, managing director of Orchard Financial Advisers, said: Many are familiar with the term ‘mortgage prisoners’, which are borrowers that are trapped in mortgages and have no option to sell or remortgage.
An increase to CGT could see the creation of so-called ‘landlord prisoners’, he said.
These are landlords who are being hammered from every angle as the government tries to make it as unattractive as possible to own multiple properties. Now they are going to make it unattractive to offload them, he added.
Capital gains tax is levied on profits made from the sale of assets, such as a BTL investment or second home.
There is currently a £3,000 tax-free allowance on capital gains, after which there is an 18% CGT applied on residential property sales for basic-rate taxpayers and 24% for those in the higher-rate tax band.
The Treasury is understood to have drawn up plans to align capital gains rates with income tax.
Gabriel McKeown, head of macroeconomics at Sad Rabbit Investments, said: As the Autumn Budget looms, a palpable sense of unease is spreading through the UK’s BTL sector, with the prospect of a significant rise in CGT leaving many landlords contemplating a swift exit from the property market.
What was once a beacon of opportunity for investors has devolved into a labyrinth of fiscal challenges and bureaucratic hurdles, he said.
For many landlords, this potential CGT rise is seen as the culmination of a series of regulatory and financial challenges that have beset the sector in recent years, he said.
With the phasing-out of mortgage interest tax relief, more stringent energy-efficiency requirements, and tighter regulations on tenant evictions, a CGT increase could be the straw that breaks the camel’s back, he said.
Furthermore, against a backdrop of already dwindling rental supply, the implications of a mass exodus, estimated at nearly a third of landlords, could be devastating for the rental market, he added.
