Buy-to-let landlords throughout the
David Cameron and Nick Clegg’s plans will see Capital Gains Tax (CGT), paid by investors when selling their non-business assets, drastically increase from 18% to 40% or 50%.
Since the announcement, estate agents have reported a deluge of enquiries from panicked landlords, eager to offload their properties before the changes are expected following an emergency government budget this June.
The proposed tax changes would hit buy-to-let landlords selling any property other than their own home. For example, the sale of a £200,000 property originally bought for £100,000, with a 40% tax bill, would net its owner £160,000 following the changes. If the owner were to sell now, they would net £182,000.
However, with changes imminent, some landlords have expressed concerns that transactions will not be quick enough to avoid the damaging CGT hikes. Those with large portfolios have been the most vocal, as the overall value of their properties could begin to plummet.
As a knock-on effect, rental prices could rocket if the coalition’s plans come into force, as landlords looks to recoup potential losses in property value by over-charging existing and future tenants.
“The last thing we want to see is a big sell-off of rented property,” commented Richard Price, Director of the National Landlords Association. “The proposed Capital Gains Tax changes could have a hugely detrimental effect on the rented property market.
'It is insulting that we professional landlords are not viewed as businessmen. The tax changes could well make the whole sector stagnate and leave landlords unable to increase their portfolios - bringing rented homes to families that need them.'
Tom Bridge, Managing Partner of Residential Conveyancing at Stephensons Solicitors LLP, said: “Those hoping to avoid the drastic increases in tax should consider putting their properties on the market. By instructing solicitors quickly, many landlords could avoid the coalition’s controversial plans and withhold a noticeable percentage of their portfolios’ value from the government’s eager hands.”