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Capital gains tax review could lead to ‘a mass exodus’ from the BTL market

The chancellor’s decision to order a review of capital gains tax, signalling a future raid on second homeowners, including buy-to-let landlords, to help pay for the huge bill for coping with Covid-19, could potentially have grave consequences for the private rented sector. 

Rishi Sunak has commissioned the Office of Tax Simplification to look into the existing rates of the levy, as the Treasury looks for ways to plug the £300bn coronavirus black hole in the nation's finances.

But the possible 'tax grab', in the form of higher stamp duty costs, could have a devastating impact on the property market, according to apropos. 

The property management firm fears that the chancellor’s plans could cause homebuyers, investors, and landlords to exit the market if major increases in tax were proposed and subsequently introduced in the near future.

David Alexander, joint managing director of apropos, commented: “While Rishi Sunak’s interventions last week to stabilise and encourage the housing market were welcome this announcement is less so. While this is only a review and may result in no changes to CGT, it is clear that the chancellor sees potentially rich pickings among the wealth accumulated in property.”

Alexander believes that the chancellor would not be willing to tax the value accumulated in an individuals’ home as that would be, in his opinion, “political suicide”. Therefore, the assumption must be that he is looking for income from second homeowners, landlords and property investors.

Alexander continued: “Targeting the private rented sector (PRS) is extremely risky as it is the second largest provider of homes in the UK and it would be impossible to fill this gap if there was a mass exodus from the market over a short period.”

Equally any sudden increase in CGT for this market could flood the market with homes depressing prices at a time when the property sector is in desperate need of support, according to Alexander. 

He added: “It is important, at this difficult time, to develop strategies to pay for the pandemic which both encourage economic growth whilst also increasing government revenues. 

“Raising CGT rates feels like a move that would stifle growth, discourage investment, and depress the housing market. I think people need to feel they have an asset that is worth something and property has always been a particular British obsession. 

“To put a cap on that value may disillusion many. Equally the PRS and property investment sector need to feel that the UK is a safe and profitable market now and, in the future,, and this could divert money from the UK to other markets at a time when it is most needed.”

  • Mark Wilson

    The headline from Letting Agent today Investors won’t sell if CGT changes target buy to let - warning

    The headline from Landlord today Capital gains tax review could lead to ‘a mass exodus’ from the BTL market

    Yup it either is or it isn't!

  • Paul Barrett

    Savvy LL will sell up and take the CGT hit.
    Leave it later and CGT will be substantially more.
    Certainly more than net yield for the next ten years.

    London LL especially should bail and invest outside London.

    There is a mass 'white flight' exodus occurring.
    80% of enquiries in my area EA are from Londoners seeking to move to the area.

    I hope to sell up to these people to escape the PRS.

    Sunak by the way doesn't care if there are fewer rental properties available.
    The Tories are trying to eradicate the small LL.
    So anything which causes LL to sell up is good news for the Govt.

    Govt of course isn't concerned about the mass homelessness of tenants.

    Few former rental homes will remain so.
    It is the up and downsizers that will be buying these former rental properties..

  • icon

    I sold up in March. It became far to onerous to keep my capital gain in property. Having it in stocks and shares means you can drip sell and manage cgt far better.

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