There would be a sharp fall in the number of buy-to-let landlords investing in the PRS if the government goes ahead with plans to increase capital gains tax, the National Residential Landlords Association has warned.
While increasing CGT rates will undoubtedly encourage some investors to hold on to property assets rather than to dispose of them, it will also deter other people from investing in the residential property sector, including the PRS, thus reducing the supply of much needed private homes for rent.
The NRLA is highlighting research which found that 72% of private landlords said that the tax was a major disincentive to sell property on the open market.
Increasing it would serve to freeze the market making it far less responsive to changing needs from renters, it is claimed. This includes the shift in demand out of city centres to properties in suburbs, towns and villages.
Given that a significantly high share of landlords entered the market to contribute to their pension, increasing CGT would negatively impact their retirement planning.
Rather than developing yet more punitive tax hikes on the rental market, the NRLA is calling on the chancellor to use the tax more smartly in the forthcoming Budget.
It recommends that to support the government’s ambitions for homeownership there should be a CGT exemption or reduction where landlords sell properties to sitting tenants.
This is a policy which has previously been supported by the recently appointed housing minister, Eddie Hughes.
Ben Beadle, chief executive of the NRLA, said: “Increasing Capital Gains Tax would reduce churn in the rental market undermining the flexibility it has always been good at providing.
“A tax hike would be a kick in the teeth for all those who have invested in property to provide security for the future for themselves and their families.
“The chancellor needs to end the war on the rental market and recognise the importance of a healthy and vibrant rented housing sector. Tax should be used more smartly, not as a blunt attack on the market.”
Comments (5)
Govt are simply a bunch of idiots. Their current ridiculous ideology is that by eradicating LL they will gain electorally. Just this fallacy alone shows you how stupid the Conservative Party is. Introducing more properties to buy by forcing LL to sell won’t magically create the circumstances for those who wish to buy. But it will create lots of homeless tenants once LL have been able to remove tenants. That could easily take 2 years!!! During which time a LL may receive no rental income if the occupying tenants choose not to pay which a LL can do nothing about. Govt intends to get rid of all small private LL. It is endeavouring to achieve this by penal measures. It might achieve it’s bonkers objectives if it incentivised LL to sell up. Like zero CGT if LL sell up over the next 5 years. If that occurred millions of LL properties would be sold drastically decreasing the size of the PRS. Increasing CGT would inevitably disincentivise LL to sell up. By it’s penal actions Govt hopes to force LL out of business. The eviction ban etc being the most obvious way Govt wishes to ‘encourage’ LL to sell up!!
Ironically I suspect that the CGT will affect property investors the least as we already pay higher rates 18% and 28% and these will only rise to 20% and 40%. Most people would sell when they are 20% tax payers so for most will only be a 2% rise, compared to a 10% rise for other investments.
This lot in charge are so thick. They said throughout the Osborne years that they wanted landlords to sell as then tenants could buy (slightly laughably). But whenever we suggested reducing CGT if selling to tenants or other FTBs, Osbo flatly refused. Why would that be, I wonder?
Now, there is still the intention to kill landlords and get the properties into the hands of owners, yet – bizarrely – they want to make it as difficult and restrictive as possible. Do they never look at each other around the cabinet table and say ‘we really haven’t got a clue, have we?!’
The cabinet are too busy dreaming up new taxes to realise the damage they are causing to the economy. Not only do they not have a clue they don’t have the acumen to realise they do not have a clue.
Perhaps the title should be “ANOTHER kick in the teeth for landlords”