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Capital Gains Tax hike risks mass exodus from buy to let - claim

A prominent agent and industry commentator says the threat of higher Capital Gains Tax risks forcing yet more investors to quit the buy to let sector.

David Alexander, joint chief executive of online property management service apropos, says news that the Chancellor has been told he could raise more revenue by doubling CGT is alarming for the lettings industry.

“Targeting the private rented sector 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 of landlords and investors from the market over a short period” says Alexander. 


“Additionally, any large-scale exit from this market would flood the market with homes depressing prices at a time when the property sector is in desperate need of support” he adds.

Alexander says he understands the need for the government to consider revenue-raising options given the scale of public spending required by the Coronavirus pandemic, but he says CGT increases would “stifle growth, discourage investment, and depress the housing market.”

He continues: “I think people need to feel they have an asset that is worth something and property has always been a particular British obsession. To suddenly dissipate accumulated value in an asset with little notice would disillusion many. Equally the private rental sector and property investors 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’s most needed.”

Earlier this week it was revealed that the Treasury's own Office for Tax Simplification produced a report for Chancellor Rishi Sunak explaining that £14 billion could be raised by cutting CGT exemptions and doubling rates - owners of buy to let properties and holiday homes would be a major target for the increases.

The OTS says the tax could be doubled, made simpler in its structure, and brought roughly in line with income tax.

"The disparity in rates between Capital Gains Tax and income tax can distort business and family decision-making and creates an incentive for taxpayers to arrange their affairs in ways that effectively re-characterise income as capital gains" the report claims.

The OTS’s consultation ahead of the report - which received over 1,000 responses - revealed a range of areas in which Capital Gains Tax is apparently counter-intuitive and creates "odd incentives." Some respondents argued that CGT is a barrier to economic growth, others that it is a barrier to a more equitable society.

The Treasury says: "The government's priority right now is supporting jobs and the economy. We thank the OTS for their independent report which will be considered in due course.”

  • Barry X

    What David Alexander says is very sensible and he makes several good points well. These points are even more important given the backdrop of years of anti-landlord and anti-agent legislation and sentiment.

    Even so, I'm quite sure nobody with any influence let alone "power" in or over the government will take the slightest notice.... or if they do it might even excite them and egg them on to step up the pressure on the PRS still further to see if indeed they really can break it!

    A lot of people are looking these days at various schemes to incorporate their portfolios - luckily most of ours already was from the start. One of the benefits of that, apart from protection from the hated s.24 tax in mortgage interest, is that you "only" pay Corporation Tax instead of the more expensive (and set to get even worse) CGT on disposals.

    The incorporation schemes typically involve several well planned steps steps to first move (probably only the beneficial interests) into an LLP then after a couple of years (or whatever) to claim Incorporation Relief on dissolving the LLP and moving the properties (now probably actual legal ownership) into a Ltd Co.....

    I'm willing to bet these further CGT tax threats will encourage even more to consider that [its a good time to be a tax advisor when its a bad time - which it almost always is these days - to be a landlord!]...... as a result, we'll probably see a huge and for most people unexpected purge by HMRC seeking out, targeting and unfairly penalising most of those unfortunate people simply trying to be sensible and use the proper rules to their advantage (and paying large fees to specialists to help them). Remember HMRC have the ultimate card of 'it doesn't matter even if the rules allow it - we have the legal right to still call it "abusive" so up yours and here's the bill for interest, penalties and the tax you tried to avoid over the last 5 years by doing this!!!!'

    If - not unreasonably - you're considering it then It might be wise to try and get some sort of "insurance" at least via a very solid written audit trail and Barristers PI policy to offer some sort of protection against that sort of thing.

    Good luck Britain and got help us, its landlords!

  • Don Holmes

    Maybe time to start considering Off shore structures in locations of No or limited tax exposure.

    Matthew Fine

    Trouble with that is you have to pay taxes to bring any monies on-shore.


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