Capital gains tax hike would freeze rental market
10 Feb 2021 11:06 PM
Proposals to increase Capital Gains Tax (CGT) would freeze the rental housing market making it less responsive to tenant demand. That is the warning from the National Residential Landlords Association ahead of the Budget on 3rd March.
With the Office for Tax Simplification proposing measures to equalise CGT with income tax rates, the NRLA is highlighting research which found that 72 per cent 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. This includes the shift in demand out of city centres to properties in suburbs, towns and villages, as noted by Rightmove.
With almost half of landlords having entered the market to contribute to their pension, 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.
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 now Housing, Communities and Local Government Minister, Eddie Hughes MP.
Ben Beadle, Chief Executive of the National Residential Landlords Association, yesterday 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.”