2. Changes to capital gains tax

When landlords sell a property, they usually have to pay capital gains tax (CGT). The CGT allowance is the amount you don’t have to pay tax on, and it’s been reduced significantly in recent years.

In April 2023, the capital gains tax (CGT) allowance was reduced from £12,300 to £6,000.

And from 6 April 2024, it will be halved again from £6,000 to £3,000.

This means that when landlords sell their properties, their capital gains tax bill will be higher.

Our research found that 38 per cent of landlords consider the reduction of the CGT allowance to be a significant challenge.

CGT cut for higher rate taxpayers

In 2023, one in four landlords told us they were looking to sell a property in the next 12 months. As a result, many will have been getting up to speed with capital gains tax rates.

Announced as part of the Spring Budget, from 6 April 2024 the capital gains tax rate for higher and additional rate taxpayers selling residential property will drop from 28 per cent to 24 per cent.

What do these changes mean for landlords?

Although a cut in the higher rate of CGT may seem positive, any benefits will be offset by the reduction of the personal allowance.

On its own, the tax cut would save the average higher rate tax paying landlord £3,800 when they sell a property, according to research by estate agency Hamptons.

However, the lower CGT allowance of £3,000 will add an average of £454 (around four per cent) to a higher rate tax paying landlord who sells a property.

The reduction of the personal allowance from 6 April means that the average lower rate tax paying landlord will pay an extra £1,674 when they sell a property.

Read more: Capital gains tax changes – how much could they cost landlords?