Government tax ‘windfall’ revealed as more landlords sell their properties

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griffin quleter capital gains tax cgt landlords

Official figures out today revealing a huge increase in capital gains tax paid on residential property sales can be explained by more landlords than usual selling rental homes, it has been claimed.

Wealth management company Quilter says the HMRC figures, which reveal a 15% jump in both capital gains tax paid on property value gains and a 20% increase in the number of taxpayers becoming liable for the tax.

Some 139,000 taxpayers reporting 151,000 disposals of residential property in the 2022/23 tax year amassing a total liability of £1.8 billion, which is much larger than in the 2020/21 tax year.

Quilter says this this data strongly suggests that there is an ongoing exodus of landlords from the property market as the tightening of tax laws on buy-to-lets make them a less attractive investment.

“Coupled with this the continuing high property values but simultaneous threat of a property price crash is seemingly making more landlords opt to sell up,” says Rachael Griffin (main picture), tax and financial planning expert at Quilter.

“How this ultimately impacts the market for all prospective buyers and renters is yet to be seen.

“Currently house prices are slipping slowly but rent remains sky high as renters compete for a dwindling stock of rental properties.”

capital gains

Quilter’s interpretation of the figures is likely to be right – CGT is only payable on second/holiday homes and BTL properties and not paid on ‘primary home’ capital gains..

Griffins says the tax take from CGT is likely to increase given the changes to the Annual Exemption Allowance (AEA) for capital gains tax.

“From £12,300 in the 2022/23 tax year, the AEA reduced dramatically to £6,000 in April 2023 and will further drop to £3,000 from April 2024,” she adds.

“This reduction could significantly boost the CGT take in future years, as taxpayers will have a lower threshold before becoming liable for CGT.”

Read the official stats in full.

3 COMMENTS

  1. Not only do residential LLs pay higher rates of CGT than owners of other assets, having to pay the tax within 60 days is another penalty. There should be a level playing field for CGT & taper relief to reflect the effect of inflation over time. Why does HMRC think we should pay more tax than anyone else? The Govt seems intent on taxing the PRS out of existence.

  2. Totally agree with Tricia. Reducing the CGT tax free allowance to a measly 3K AND not adjusting gains for inflation, especially when inflation is running so high, is just plain WRONG. To add insult to injury the Chancellor knew exactly what he was doing when he did it. Does he take us for fools? Yes, and on that he is probably not wrong!

  3. Sadly LL’s selling up will create opportunity’s for some. Those with little experience will exit the market; those established will make less money and will probably review their long term objectives. With the govt changes the way I see it is that the accidental landlords will make their exit as compliance is getting tougher. For those established may be a buying opportunity as values come down or correct themselves …in this otherwise crazy market.
    On the whole bricks and mortar are still considered as best long term investments and after all.
    Yes tax is a bummer all round. By the time corrective measures are re-introduced and allowances increased the people who suffer will be those most in need of private accommodation.
    In the end the controls (some of which are necessary) will potentially create a bigger headache for local authority’s to house those displaced or homeless.
    My thoughts will get worse before it levels off. I think landlords may in the long term be able to work closely with LA’s as they will need us and they will see that soon.
    A recent article I read made ref to a London council paying Landlords legal cost, arrears and negotiate to keep the tenant i the home 👍🏼🙏
    I see this setting a trend and changes to follow …..

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