Capital Gains Tax for Buy-to-Let Landlords

A lower rate of 18% is applied to gains where the seller’s other income is insufficient to use up all of their ‘basic rate band’ and, prior to 5 April 2024, an upper rate of 28% was applied to any gain remaining.

The Chancellor announced a reduction to 24% of this top rate in his March 2024 budget for all gains realised from 6 April 2024. The Chancellor reduced the tax rate payable by landlords as he wanted to encourage owners of second homes and buy-to-let properties to sell, increasing the number of properties available to individuals and families trying to buy a home.

All tax changes introduced in a Budget are costed, and a summary of the impact of the change on the expected tax receipts is published. The ’Exchequer Impact’ for this tax change, which took into account not only the CGT receipts but also ’other property tax revenue’ – i.e. Stamp Duty Land Tax – forecast an increase in cash collected by the Treasury from 2024-2025. Details of this forecast are given in the table below:

This forecast clearly sets out an increase in tax revenues in 2024 and 2025.

Buy-to-Let landlords have faced many challenges over the last ten years, including a considerable increase in legislation that they are required to comply with, the need to increase the energy efficiency of their buildings, and most recently the huge increase in mortgage rates, which in many areas has outstripped the increase in rents they can obtain from tenants. The threat of rent controls and removal of the right to evict tenants (except in very defined circumstances) are making many consider whether this is the time to sell up.

The increase of revenues in 2024 – 2026 forecast at £660m is not significant in terms of total Government expenditure but is a sum that could be helpful to the new Labour Government. However, the challenge for Buy-to-Let landlords is in deciding whether this is sufficient to persuade the new Chancellor to keep the top rate of CGT at 24%, or whether they believe the promise of rent controls and cessation of ‘no fault evictions’ will push Buy-to-Let landlords to sell up. For landlords who believe the top rate will increase, selling before 5 April 2025 in a residential market where very little growth in values is forecast looks increasingly attractive.

Would you like to know more?

If you have any questions about the above and how it applies to your business, please get in touch with your usual Blick Rothenberg contact or Heather Powell using the form below.