The Telegraph is running an article on the possible outcome of the Autumn statement on landlords. The article can be seen here (subscription might be necessary), and says:
Landlords will lose thousands of pounds in sale profits under proposals which would be a fresh tax blow to property investors.
Thousands of landlords have cashed out and left the buy-to-let market this year ahead of costly energy efficiency rules, tighter eviction rules and years of punitive tax changes.
Those who have sold up have reaped the benefits of years of house price growth, but the Government is now poised to take a bigger slice of their profits, as revealed by The Telegraph earlier today.
The Chancellor is considering an increase in the headline rate of capital gains tax (CGT) and a shakeup of allowances in a bid to plug the £50bn hole in Britain’s public finances.
Assuming capital gains tax was aligned with income tax – as was previously recommended by the Government’s tax adviser – higher-rate property investors would pay 40pc on gains, rather than 28pc.
It would mean a buy-to-let landlord who is a higher-rate taxpayer who bought a property for £226,000 in August 2017, the average property price at the time, and sold it for £296,000 today would pay an additional £8,400 in tax on a gain of £70,000, according to analysis by tax firm Blick Rothenberg.
Wealthier second home owners who invested in a more expensive property will be hit even harder.
An additional-rate, 45pc, taxpayer who bought a property for £380,000 and is now selling it for £494,000 – a typical gain in a holiday let hotspot over the past two years – will have made a capital gain of £114,000. If their CGT rate increases to 45pc, the top-rate threshold for income tax, they will be £18,700 worse off.
Nimesh Shah, of the accountancy firm, said: “Many individual landlords are considering their options in the property market, given increasing mortgage costs, and the compounded effect of the mortgage interest relief restriction introduced in 2017.
“With the suggestion that landlords will be hit with significantly higher capital gains tax, investors will need to seriously consider selling their properties before any rate rise takes effect to ‘lock-in’ the current highest rate of capital gains tax of 28pc.”
Other rumoured proposals to raise rates on dividends, or cut the allowance from £2,000, would also dent the profits of incorporated landlords, the self-employed and investors.
The raid would serve as a major blow to landlords who have relied on capital appreciation of their buy-to-let and holiday lets as a pension plan.
CGT is levied on profits made from selling an investment, including shares and properties that are not a main home.
Chancellor Jeremy Hunt is understood to be considering the sweeping changes as part of his Autumn Statement, although no exact details have been confirmed by the Treasury.
In July 2020 then Chancellor Rishi Sunak commissioned the Office for Tax Simplification to review CGT in a bid to simplify the tax, with the Government adviser suggesting the rates should be aligned with income tax in a bid to streamline the system.
With Mr Sunak now at the head of the Government, it is possible any CGT reforms would follow this recommendation. Currently income thresholds sit at 20pc for basic-rate taxpayers, 40pc for higher-rate taxpayers and 45pc for additional-rate taxpayers.
Note that the article is calling for ‘Ahead of the Budget on November 17, we want to know what taxes you think should be raised and those that should be left well alone’