The UK Government is considering aligning capital gains tax (CGT) rates with income tax rates to address a £22 billion fiscal deficit, potentially increasing CGT rates up to 45%. This move could increase the average landlord’s tax bill by £11,000 and trigger a mass sell-off of rental properties. Current CGT rates on property are 18% for basic rate taxpayers and 28% for higher rate taxpayers, but aligning them with income tax could raise them to 20%, 40%, or 45%.

Official data shows an increase in property sales by buy-to-let investors in 2022-23 due to high interest rates and reduced tax relief on mortgage interest. Despite a weak property market, CGT revenue from residential properties rose by 7% to £1.9 billion.

Experts warn that higher CGT rates could lead to landlords exiting the market, reducing the availability of rental properties, and impacting house prices. Additionally, a drop in overall CGT revenue might occur if investors hold onto their properties longer to avoid higher taxes. The Office for Tax Simplification has previously noted that raising CGT rates could decrease disposals, reducing potential tax revenue. The Government aims to boost homeownership by building 1.5 million homes by the end of the current Parliament.

More details can be seen in a Telegraph report here (subscription may be necessary)