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From next month, personal capital gains tax relief will be reduced from £12,300 to £6,000, meaning most investors will pay more when they sell.
This is despite Chancellor of the Exchequer Jeremy Hunt’s attempt to reduce the CGT tax rate from 28% to 24% in the Spring Budget.
According to real estate agents in the Hamptons, 89% of high-rate tax landlords and 100% of low-tax landlords who sell are set to experience an increase in their capital gains tax (CGT) bills in April.
Aneysha Beveridge, head of research at the Hamptons, said: “While the Chancellor has made clear he wants to encourage landlords to sell and add new housing supply to the market for first-time buyers, the reality is that capital gains tax will change. ” Taken as a whole, this is probably a deterrent.
“Most landlords who exit the market this year will end up paying more in taxes than they did two years ago.
“Recent changes to CGT will hit landlords hard, making the lowest returns the most difficult. Typically these investors are newer millennial investors with lower price appreciation, or cheaper areas of the country. On the other hand, older investors who have been landlords longer and have accumulated larger profits are much more likely to benefit from tax breaks.
“The Chancellor’s CGT rate changes will only apply to landlords who own a home in their own name and pay higher rate tax. Investors who own a home in a company, on the other hand, will be able to repay the proceeds of the sale after deducting expenses. The number of people paying corporate tax is increasing.
“Tax efficiency has long been a big draw for corporate structures, but increasingly so too is the certainty and stability they provide. Chancellors are generally found to be less likely to tinker with corporate tax laws than individuals. ing.”
If high-rate tax landlords report capital gains of less than £68,000, they will be in a worse situation than they were two years ago.
The average landlord sold their rental property for £110,000 more in 2023 than they bought it for.
BTL ownership period | Average CGT bill up to April 2022 | Average CGT bill from April 2024 | change (%) | Currency exchange (pounds) | |
less than 5 years | £9,410 | £10,298 | 9% | £888 | |
6-10 years | £11,274 | £11,895 | 6% | £621 | |
11-15 years old | £13,645 | £13,928 | 2% | £283 | |
16-20 years old | £12,394 | £12,855 | Four% | £461 | |
over 20 years | £20,761 | £20,027 | -Four% | – £734 | |
overall average | £12,449 | £12,903 | Four% | £454 |
Increase in rent
Rental growth slowed again in February. Last month, the average rent for newly let homes in the UK rose by 7.1% year-on-year, down from 8.3% in January 2023 and a peak of 12.0%.
Rent growth continues to outpace inflation, with rent increases meaning the average tenant moving into a new property will pay £87 per cm more in rent than if they moved in last year, or £1,044 a year more. It means paying.
These affordability pressures, combined with the increase in housing on the rental market, are slowing rental growth. There was a 30% increase in homes available to rent across the UK last month compared to the same period last year when stock levels hit rock bottom. However, this primarily reflects the fact that it is taking a little longer to rent out homes, rather than an increase in landlord purchases. Compared to February 2019, rental housing is still down 41%.
Scotland recorded the biggest rent rise last month. The average price of new rentals in Scotland, which has no rent cap, rose by 11.0% year-on-year. Scotland is one of only two regions (including the East of England) where rents are still rising at a double-digit pace. This suggests that landlords are taking advantage of vacancy queues to raise rents to market rates.
Mr Beveridge added: “The pace of rent growth continued to slow in February. However, annual declines in rents are still a long way off and tenants continue to feel pressured.
“Due to lower mortgage rates, homeowners who need to refinance in 2024 will see smaller adjustments to their mortgage costs than those who refinance in 2023. It is gradually helping to balance the family’s books.”