CGT tax change - It could have been worse, say agents

Just about every agency that has commented on yesterday’s Autumn Statement are in agreement - changes to Capital Gains Tax, Inheritance Tax and Dividend taxes will hit the private rental sector, but overall it could have been even worse.

In summary, Chancellor Jeremy Hunt promised to keep Stamp Duty cuts in place until the end of March 2025, after which it will rise. Capital Gains Tax allowances will be reduced from £12,300 to £3,000 by April 2024, while Inheritance Tax thresholds will be frozen. 

Tom Bill, Knight Frank's head of UK residential research, comments: “The cut to the CGT exemption is a further disincentive for landlords but, like other announcements in the Autumn Statement, it could’ve been worse. It will disproportionately affect landlords of lower-value properties but CGT rates have not been aligned with income tax, so a material drop in demand or a wave of selling is unlikely. Landlords have faced a series of tax hikes in recent years but private rented property accounts for one in five of English households. At a time when living costs are rising so quickly, policy should remain rooted in economics, encouraging landlords to remain in the sector and keeping downwards pressure on rents."

Bill Harvey from London specialist agency Lurot Brand says: “The tax burden increases for landlords and the changes to Capital Gains Tax were not unexpected.  However, we expect market conditions to remain the same as we enter 2023, with a lack of rental supply and healthy demand from tenants looking to secure a property immediately.”

And Sylvie Harris, director of lettings at INHOUS, says: “For the many landlords who have been planning to dispose of their rental assets due to the raft of legislation and adverse tax changes, the announcement to halve the Capital Gains Tax exemption in 2023 will come as a blow.  This news will make it less favourable for landlords to sell and they will likely continue to let their properties until the conditions improve.  However, tenants will benefit as there is already a shortage of rental properties available on the market.”

Winkworth chief executive Dominic Agace comments: “The change to CGT is yet another negative move by successive Chancellors against buy-to-let landlords, many of whom are already leaving the sector due to increased taxation, regulation and rising interest rates. This is an own goal by the Government as the private rental sector is the only place many people can find a home if they are not in a position to buy. With the lack of social housing supply and the need for young professionals to be highly mobile and able to move to London and other major cities, the role of the private landlord is more important than ever and should be encouraged.”

Emma Hayes, managing director of Platinum Property Partners, sees it this way: “Cuts to dividend allowances and the already confirmed u-turn on Corporation Tax reduction will hurt limited business landlords the most, who have restructured their businesses to combat the reduction in mortgage interest tax relief introduced in 2017. And the cuts in the Capital Gains Tax allowance to £6,000 next year and £3,000 the following year could be catastrophic for cash-strapped landlords who are selling non-profitable rental properties. The measures could cause a mass exodus of smaller landlords in the coming months as they try and sell before the CGT cut comes into effect, which will put a downward pressure on prices but an upward pressure on rents as supply diminishes.”

Nathan Emerson, chief executive of Propertymark, says: “Our member agents say the raised Stamp Duty threshold has had a positive effect on the confidence of their buyers and sellers, so we’re naturally disappointed it will be phased out by 2025. Stamp duty is not only a barrier to entry to the property market, it restricts downsizers from releasing much needed family homes for second steppers. Bands that better represent house price growth and affordability are key to keeping the market moving.”