Financial experts are warning that the expected rise in CGT in Chancellor Reeve’s October budget could mean landlords will find it too costly to sell their rental properties and become trapped in the rental market.

In the current political climate many landlords are already selling up, with the latest data from TwentyCI showing the number of former rental properties for sale has hit a 10-year high.

If however CGT is aligned with income tax the rates, the costs of doing so will increase exponentially and the rush to sell to beat the rise is now on.

Unease

As was reported in The Neg, the CGT rate payable would be 40% for higher rate tax payers and 45% for additional rate tax payers, i.e. the tax rate would increase by up to 400%.

Gabriel McKeown, head of macroeconomics at Sad Rabbit Investments, told Mortgage Solutions: “A palpable sense of unease is spreading through the UK’s buy-to-let sector, with the prospect of a significant rise in CGT leaving many landlords contemplating a swift exit from the property market.

For many landlords, this potential CGT rise is seen as the culmination of a series of regulatory and financial challenges that have beset the sector in recent years.

“What was once a beacon of opportunity for investors has devolved into a labyrinth of fiscal challenges and bureaucratic hurdles.

“For many landlords, this potential CGT rise is seen as the culmination of a series of regulatory and financial challenges that have beset the sector in recent years.

“With the phasing-out of mortgage interest tax relief, more stringent energy-efficiency requirements, and tighter regulations on tenant evictions, a CGT rise could be the straw that breaks the camel’s back.

“Furthermore, against a backdrop of already dwindling rental supply, the implications of a mass exodus, estimated at nearly a third of landlords, could be devastating for the rental market.”