The fact that there has not yet been a consultation on reforming Capital Gains Tax (CGT) means the lettings industry is kept waiting, according to Neil Cobbold, chief sales officer at PayProp.
Cobbold says: “Raising property taxes such as CGT is seen as an effective way of paying off the estimated £340bn cost of the COVID-19 pandemic, so it’s a surprise not to see a consultation launched as part of the government’s ‘tax day’.”
Cobbold points to the fact that The Office for Tax Simplification recently calculated that doubling CGT rates and lowering the Annual Exempt Amount could raise an additional £14bn for the Treasury each year.
He adds: “CGT is paid by relatively few people – around 1% of taxpayers last year. However, landlords are hit when they sell properties, so an overhaul would have an outsized impact on the rental market. Residential properties already attract a higher rate of CGT than other investments, further adding to the tax burden.
“Increasing CGT in the future could have unintended consequences: encouraging more landlords to sell properties quickly before the new rates take effect and then discouraging future investment in the buy-to-let market.
“This combination could reduce available rental housing stock over the next few years and cause rents to rise further.”
Although a consultation is yet to be announced, Cobbold says that letting agencies and landlords should continue to prepare for changes to the CGT system in the future.
Cobbold concludes: “When the time arises, it’s important that letting agencies and landlords take the opportunity to give their feedback on how CGT rises could affect the rental sector, encouraging politicians to consider the impact on housing.”
This post has originally been featured in Property Wire.