Landlords are warning the government that if it increases Capital Gains Tax the rental market will freeze up.
Chatter has increased in recent months about a possible CGT hike following a report from the Office for Tax Simplification proposing measures to equalise Capital Gains Tax with income tax rates.
The National Residential Landlords Association is highlighting research which found that 72 per cent of private landlords regard the tax as 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. the NRLA says. This includes the shift in demand out of city centres to properties in suburbs, towns and villages, as noted in several recent Rightmove reports.
The association says almost half of landlords have entered the market chiefly to contribute to their pension - for them, increasing CGT would negatively impact their retirement planning.
For many this is predicated on liquidating assets to fund their later life, including in many cases their care costs.
The NRLA says that rather than developing yet more punitive tax hikes on the rental market, Chancellor Rishi Sunak should use the tax more smartly in the March 3 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 new junior minister at the Ministry of Housing, Communities and Local Government, Eddie Hughes MP.
Ben Beadle, NRLA chief executive, says: “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.”
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