Chancellor Jeremy Hunt’s move to lower the amount of capital gains charged on property sales from 28% to 24% could push disillusioned landlords to depart from the sector, experts have warned.
The change will take effect from April 6th, as the Treasury said in documents released alongside the Budget: “This will encourage landlords and second homeowners to sell their properties, making more available for a variety of buyers including those looking to get on the housing ladder for the first time.”
The move means a higher-rate taxpayer making a gain of £20,000 on a second home will save £680.
However some commentators responded by saying the government should be doing its bit to encourage creating new rental stock, rather than a move which could reduce it.
Andrew Noton and Phil Blackburn, partners at chartered accountants and business advisers Lubbock Fine, said: “It appears the government are discouraging private buy to let landlords and persuading them to leave the market.”
And Steve Richmond, general manager UK&I at Reapit, said: “This may (as the Chancellor claims) result in more transactions, but I’m wary that this simply means shifting supply from an already heated lettings market to the sales side, leading to an increase in rents amidst reduced supply in the sector as disillusioned landlords take advantage of this opportunity to sell-up.”
In a lengthier response, Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), argued that a change to the 3% stamp duty surcharge would have been a far better move.
She said: “The Chancellor’s announcement… is little more than a sop to those landlords forced to exit the private rental sector by tough economic conditions and a punitive taxation system.
“IMLA would like to have seen the Chancellor offer more support to the sector by announcing a reduction in the 3% additional Stamp Duty which has been levied on second and subsequent property purchases since 2016.
“This extra tax is an added financial burden on the private sector landlords who provide homes for 20% of the UK’s households, at a time when our research indicates they are anticipating an increase of 80% in their mortgage costs over the next two years.
“Given the dramatic imbalance between supply and demand in the private rental sector, which has pushed rents to record levels, an incentive to encourage landlords to invest in more properties and increase supply would have been very welcome.”
On January 1st 2025 the capital gains tax exempt amount is scheduled to drop from £6,000 to £3,000, which will somewhat offset the reduction.
Ryan Etchells, chief operating officer at Together, was more positive, saying it was a “welcome move to help extend the market to a new wave of buyers and property professionals”.
He added: “This will offer confidence to those who have put off the option of downsizing, opening up more family homes and spaces for first time buyers. This should provide the property market with a much-needed shot in the arm.”