A prominent figure in the property industry has warned Prime Minister Andy Burnham against higher taxes on landlords.
Tom Bill, head of residential research at lettings and estate agency Knight Frank, says that the summer now ending has been devoid of the tax speculation that damaged markets a year ago.,
But he says: “One possible change appears to be aligning rates of Capital Gains Tax and Income Tax.
“It would be bad news for some landlords, but tenants would also suffer if owners sold and upwards pressure on rents increased.
The Renters Rights Act, which was introduced in May, has already demonstrated the law of unintended consequences as some landlords have exited while others have set higher asking rents to offset the greater financial risks they face with the new legislation.”
In simple terms, current residential Capital Gains Tax rates of 18% and 24% could rise to match income tax rates of up to 45% if such a policy were agreed at October’s Budget.
While many landlords exiting the sector will have sold at the current rates, those with properties on the market and unable to find purchasers – a problem increasingly common for flat sales – risk being caught by such a change if it’s agreed this autumn and enforced with little notice.
Elsewhere in his weekly blog, Tom Bill says a so-called Smorgasbord of taxes on assets and wealth is likely to be Burnham’s preferred method of payment for his plans, which would mean the High Value Council Tax bands introduced in last November’s Budget may prove to be merely introductory rates.
“Given the bond market won’t permit a government spending spree, Labour backbenchers won’t sanction meaningful spending cuts, and the Labour manifesto ruled out income tax, VAT or national insurance rises, the approach increasingly looks like the default option.
“For a Prime Minister known to be a people-pleaser … he will have to alienate more of the electorate as he makes difficult choices that involve trade-offs and lead to unintended consequences.
“If high-value property is targeted in the third successive Budget (following changes to the additional rate of stamp duty in 2024 and council tax bands in 2025), it could put a dent the gradual recovery that has been taking place in the prime London market this year.”
