NRLA urges capital gains tax reform

The government is being urged to change how capital gains tax treats house price rises, with inflation accounting for most of the increase.

National Residential Landlords Association (NRLA) says that only a fifth of house price growth between 2015 and 2024 was a gain in real terms.

The NRLA says the tax system treats the rest, which reflected inflation, as though it were profit.

Tax on inflation

The NRLA’s chief executive Ben Beadle said: “It is absurd that investors face capital gains tax on increases in property prices that are simply the result of inflation.

“That’s not a real gain, and it shouldn’t be treated as one.”

He added: “Taxing inflation devalues the worth of an investment, and any potential return.

“If nothing changes potential investors will be better off leaving cash in the bank, where they face none of the risks or difficulties inherent with providing homes.”

Relief for landlord investment

Ahead of the Budget, the NRLA is urging the Chancellor to adjust a property’s acquisition price and any qualifying capital expenditure for inflation before calculating the taxable gain on disposal.

It also wants relief to reflect how long a property has been held and used to provide accommodation.

Properties bought and sold speculatively over a short period would receive no relief under its proposals.

Genuine increases in value would remain subject to capital gains tax.

Homes to rent

Safeguards would prevent the proposed relief from creating or increasing an allowable capital loss, or exceeding the inflation actually experienced.

The NRLA says the changes would preserve the purchasing power of money released by a sale and support long-term investment in homes to rent.

The organisation points to Rightmove figures which show that each available rental home attracts an average of 10 enquiries, double the pre-pandemic figure.

The NRLA says the rental home shortage makes it harder for people, particularly younger people, to access work and educational opportunities.