PayProp: Letting industry waiting for CGT changes
The letting industry has been left to wait for changes to Capital Gains Tax (CGT), according to Neil Cobbold, chief sales officer at PayProp.
Cobbold said: “Raising property taxes such as Capital Gains Tax (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’”.
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.
CGT is paid by relatively few people, around 1% of taxpayers last year.
Cobbold noted, however, that “landlords are hit when they sell properties, so an overhaul would have an outsized impact on the rental market”.
He added: “Residential properties already attract a higher rate of CGT than other investments, further adding to the tax burden.”
Cobbold believes that increasing CGT in the future could have unintended consequences, such as encouraging more landlords to sell properties quickly before the new rates take effect and then discouraging future investment in the buy-to-let market.
He said: “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.”