Landlords will save £4,468 in CGT on each property sale

The average landlord will benefit from a cut in Capital Gains Tax (CGT) but will still face a significant tax bill when exiting the buy to let sector, research reveals.

Zero Deposit, the tenancy deposit alternative provider, has analysed house price growth over the last decade to assess the potential CGT owed by landlords.

Its findings reveal that while the tax rate is dropping from 28% to 24% in April, landlords will still pay an average of £26,806 per property.

But there is still a saving of £4,468 for landlords.

‘Incentivise investment into the buy to let sector’

The firm’s chief executive, Sam Reynolds, said: “Another strange budget for the property market and one where the biggest surprise was a cut to capital gains tax, bizarrely positioned by the government as a bone thrown to landlords to incentivise investment into the buy to let sector.

“Having hit landlords with a string of legislative changes designed to reduce profitability in recent years, they’ve now made the idea of exiting more attractive, which to most, understandably seems like a backwards approach.”

He added: “And while a 4% cut to capital gains tax may seem generous on the face of it, for the average landlord it equates to a reduction of just £4,500 per property, while the government still collects a hefty £27,000 on their hard-earned nest egg.”

Decade of significant house price growth

The firm’s research highlights a decade of significant house price growth, with the average UK property value increasing by 65%, translating to a £111,693 gain.

This would have resulted in a hefty £31,274 capital gains tax bill under the old rate.

Landlords exiting the PRS will still see a significant chunk of their profit taken by the taxman.

Even after the tax cut, they can expect an average capital appreciation of £84,886 per property over the last 10 years.

Landlords in London will see the biggest gains and tax reductions

London landlords are set to see the biggest gains and tax reductions with an average CGT bill falling by £7,634 to £45,806, with properties still appreciating by an average of £145,052.

Other regions will also benefit, with the South East and East of England seeing average tax reductions of £6,206 and £5,928 respectively.

However, the North East has seen the smallest property value increase and that means a lower tax saving, with landlords taking home £31,501 in capital appreciation and saving just £1,658 on their tax bill.

For more information about landlord tax and incorporation, contact Property118’s experts: