Rishi Sunak is being urged not to increase capital gains tax, as part of the government’s attempts to claw back the cost of extra spending during the coronavirus pandemic.
A review of the levy unveiled earlier this week by the chancellor paves the way for higher taxes for second homeowners, including buy-to-let landlords.
But the concern is that yet another proposed tax hike could see buy-to-let landlords exiting the market in droves before it is introduced.
Tax and regulation changes continue to have a negative impact on the buy-to-let market, with a number of landlords selling properties with a view reducing their portfolio, or exiting the market altogether.
Mortgage interest relief changes, the scrapping of the ‘wear and tear’ allowance and the introduction of the 3% stamp duty surcharge have hit landlords’ profits over the past few of years, which partly explains why so many people are exiting the BTL market and thus reducing the supply of much needed private rented stock.
The government’s draconian tax changes have not just pushed a number of BTL landlords out of the PRS, but also left many prospective tenants with little alternative but to bid against each other, pushing rents up in the process, as a result of falling housing supply.
Jo White, a director in the tax advisory tear at Kreston Reeves, said: “The government has made historic levels of spending into the UK economy to help businesses and individuals through the coronavirus pandemic. We know that a review of taxation was likely to follow and capital gains tax, much overlooked in recent years, is an obvious and easy place for government to start.
“Buy-to-let investors with portfolios held personally or in corporate structures will feel these changes if they look to sell parts of their portfolio or shares in the company that holds property.
“Property investors have been the target of many recent tax changes and may feel unfairly targeted at a time when they are facing Covid-related rent holidays from tenants.
“Individuals with a holiday or second home could face, if they are an additional rate taxpayer, a CGT rate of 45% on any gain from the sale of property and will have just 30 days to settle any liability. Many may inevitably choose to hold on to property seeking rental incomes instead.”
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