A holiday lettings agency has criticised the proposed rise in capital gains tax which may be introduced this week in the Chancellor’s autumn statement.

Finest Retreats says it’s likely to lead to “a large withdrawal of landlords from the market”.

The proposed rise, which analysts believe represents efforts to plug the £50 billion hole in Britain’s public finances, could bring CGT – currently 28 per cent on residential property and 20 per cent on other assets – in line with income tax so that higher-rate taxpayers face a flat rate of 40 or 45 per cent.

Furthermore, in addition to the proposed increases in CGT, second-home owners may no longer have the option to offset mortgage interest payments against their income taxes if the Office for Tax Simplification recommended changes go ahead. 

Richard Bond, founder of Finest Retreats, says this is the bigger concern with a holiday let owner paying almost £2,000 more tax annually, based on earnings of £24,000.

Bond works with hundreds of second home-owners across the UK and comments: “The proposed increase in regulation and taxes is a major cause for concern for landlords who are being targeted by the government to foot the bill for Britain’s public finances.”

“It seems grossly unfair to apply the same rules to people that effectively work in the UK’s domestic tourism industry as to those that have a ‘spare’ home elsewhere in the country that sit empty for months on end. The two concepts are totally different and their respective value to the local economy must not be confused.”

“These properties are essentially mini businesses, which is the reason for the tax break, and the interest should be tax deductible. If it’s not, many landlords will be faced with no other alternative than to withdraw from the market due to these increased expenses.” Bonds adds. 

“For an average three bedroom property, a professionally run full-time holiday let contributes over six times more to the local community than a holiday home; and over 3 times more than an owner occupier or long term rental.

“Holiday lets which are professionally operated generate year-round guests who eat in the local restaurants, drink in the local pub and shop in the local shops several times per week. Often more than those who live in these locations permanently. The regular maintenance and upkeep of the properties generates business for local tradesmen and women. This all adds up to considerable positives for the local economy often in places where no other jobs are available” Chapman adds. 

Further to the CGT increase, there has also been the suggestion to reduce the annual CGT allowance threshold from £12,300 to £5,000 or less.  “Blows from both ends of the scale could spark a mass exodus of landlords from the market” concludes Bond.