The lettings sector is giving a sigh of relief at the absence of any change to Capital Gains Tax by HM Treasury.
CGT reform has long been mooted by the government’s own Office of Tax Simplification and announcements were expected yesterday – but they did not come.
Now Neil Cobbold, chief sales officer at automated payment service PayProp, says he is surprised at the omission given that CGT could have been used to fill part of the £340 billion ‘black hole’ caused by Coronavirus spending.
“The Office for Tax Simplification recently calculated that doubling CGT rates and lowering the Annual Exempt Amount could raise an additional £14 billion for the Treasury each year. CGT is paid by relatively few people – around one per cent of taxpayers last year – but the measure has a significant impact on the lettings industry because landlords are hit when they sell properties” he says.
Residential properties already attract a higher rate of CGT than other investments, further adding to the tax burden.
Cobbold continues: “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 no consultation was announced today, letting agencies and landlords should continue to prepare for changes to the CGT system in the future.
“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 Letting Agent Today.