Landlords spared £15k Capital Gains Tax hikes
The Chancellor has ruled out raising Capital Gains Tax and Chris Mason of The Letting Partnership has calculated how much this will help landlords.
Landlords appear to have been spared a potential 88% increase in Capital Gains Tax (CGT) liabilities.
It comes as further reports have confirmed that Chancellor John Healey won’t hike CGT in his Budget next week.
New analysis by The Letting Partnership, which examined house price growth during the past decade, reveals how significant the financial implications of aligning CGT with income tax rates could have been for landlords – particularly those paying higher and additional rates of Income Tax.
The research found that the average value of a home in Britain was worth £198,169 in July 2016, rising to £272,611 by July 2026, an increase of £74,442 in the past decade.
Landlords need more than the avoidance of further tax increases.”
Under current rules, a landlord paying the higher or additional rate of Income Tax would face an illustrative CGT liability of £17,866 on this gain, based on the current 24% rate and excluding any CGT allowances.
However, had CGT been aligned with Income Tax rates, the liability for a higher-rate taxpayer could have increased to £29,777 at 40%, an additional £11,911, equivalent to a 66.7% increase.
For additional-rate taxpayers, a move to 45% could have seen their CGT bill climb to £33,499, an increase of £15,633, or 87.5%.
Even basic-rate taxpayers could have faced an increase, with the liability on the same capital gain rising from £13,400 at 18% to £14,888 at 20%, an additional £1,488 or 11.1%.
The Chancellor’s rejection of higher CGT rates should remove the immediate prospect of a substantial additional tax burden for landlords considering selling an investment property.
Further tax burdens
However, The Letting Partnership highlights that landlords are already preparing for changes to property income taxation from April 2027, when separate tax rates on rental income will increase by two percentage points, alongside the continued expansion of Making Tax Digital requirements.
These financial pressures also come against the backdrop of the Renters’ Rights Act, which introduced substantial changes to the private rented sector on 1st May this year, including the abolition of Section 21 no-fault evictions and the transition to periodic tenancies.
Further requirements are also on the horizon, including the rollout of the new national landlord registration system from December 2026, bringing additional responsibilities for landlords as they continue to adapt to the new regulatory landscape.
It means that while the decision not to increase CGT will be welcomed across the sector, it does not remove wider concerns about the cumulative impact of taxation and regulation on landlord confidence, future investment and the supply of rental homes.
Chris Mason (pictured), Chief Operating Officer at The Letting Partnership, says: “The decision to reject calls to raise CGT is a welcome step in the right direction, but landlords need more than the avoidance of further tax increases. They need a stable and supportive environment that gives them the confidence to remain in the sector and continue providing much-needed rental homes.”
