From next month the personal Capital Gains tax allowance will fall from £12,300 to £6,000 – causing the majority of investors to end up paying more when they sell.
This is despite Chancellor Jeremy Hunt’s move to lower the CGT rate from 28% to 24% in the Spring Budget.
According to Hamptons estate agents 89% of higher-rate and 100% of lower-rate taxpaying landlords who sell will see their capital gains tax (CGT) bill rise in April.
Aneisha Beveridge, head of research at Hamptons, said: “Although the Chancellor made it clear he was hoping to encourage landlords to sell up and add new housing supply into the market for first-time buyers, the reality is that the capital gains tax changes taken as a whole will likely act as a disincentive.
“Most landlords leaving the market this year will end up paying more tax than two years ago, not less.
“Recent changes to CGT will hit landlords making the smallest gains hardest. Typically, these will be newer millennial investors who have seen less price growth, or those selling cheaper homes in less expensive parts of the country. Meanwhile, older investors who’ve been landlords for longer and have accumulated bigger gains are much more likely to benefit from the tax cut.
“The Chancellor’s changes to CGT rates only apply to higher-rate taxpaying landlords with homes in their own names. Meanwhile, the growing number of investors with homes held in companies pay corporation tax on their sale proceeds after costs instead.
“While tax efficiency has been the major draw of a company structure, increasingly it’s also the certainty and stability it offers. Chancellors’ have generally proved less likely to tinker with company tax rules than individuals.”
A higher-rate taxpaying landlord reporting a capital gain of less than £68,000 will find themselves worse off than two years ago.
The average landlord sold their buy-to-let in 2023 for £110,000 more than they bought it.
| Length of BTL ownership | Average CGT bill before April 2022 | Average CGT bill from April 2024 | Change (%) | Change (£) | |
| Sub 5 years | £9,410 | £10,298 | 9% | £888 | |
| 6-10 years | £11,274 | £11,895 | 6% | £621 | |
| 11-15 years | £13,645 | £13,928 | 2% | £283 | |
| 16-20 years | £12,394 | £12,855 | 4% | £461 | |
| 20+ years | £20,761 | £20,027 | -4% | -£734 | |
| Overall Average | £12,449 | £12,903 | 4% | £454 |
Rental growth
Rental growth continued to cool in February. Last month, the average rent on a newly let home in Great Britain rose 7.1% year-on-year, down from 8.3% in January and a peak of 12.0% in August 2023.
Rental growth is still running faster than inflation and increases mean the average tenant moving into a new property would pay an extra £87 pcm or £1,044 a year more in rent than if they moved last year.
These affordability pressures combined with more homes on the rental market have slowed rental growth. There were 30% more homes available to rent across Great Britain last month compared to the same time last year when stock levels reached rock bottom. However, this predominantly reflects the fact that homes are taking a little longer to let, rather than a rise in landlord purchases. Compared to February 2019, there are still 41% fewer homes to rent.
Scotland recorded the biggest rent rises last month. The average cost of a newly let property in Scotland, which isn’t subject to rent caps, rose 11.0% year-on-year. Scotland is one of only two areas (including the East of England) where rents are still rising at a double-digit pace. This suggests landlords are using vacant procession to bring their rents up to market rate.
Beveridge added: “The pace of rental growth continued to cool in February. But rents are still some way off falling annually and tenants continue to feel the squeeze.
“Lower mortgage rates have meant landlords needing to refinance in 2024 are seeing a smaller adjustment in their mortgage costs than those who remortgaged in 2023. This is slowly helping to balance mortgaged investor’s books.”
