Chancellor Rachel Reeves’ tax hike rumours fuel anxiety in PRS

Rumours of a capital gains tax hike could take a toll on landlords and tenants.

In an interview on Bloomberg TV, Chancellor Rachel Reeves refused to rule out an increase in capital gains tax in the October budget.

This uncertainty is already affecting the property market, with the Royal Institution of Chartered Surveyors (RICS) reporting a 16% drop in new landlords instructing estate agents in the three months leading up to July, as landlords grow more concerned about Labour’s tax plans.

Strike the right balance

The Chancellor told Bloomberg TV: “I want to bring that tax burden down because I want to make Britain the best place to start and grow a business, and I want working people to keep more of their own money in their pockets.”

However, when asked directly about an increase in capital gains tax Ms Reeves refused to give a straight answer and said: “It is always important when you’re deciding tax policy to strike the right balance.”

Horrible toll on tenants

Sarah Coles, head of personal finance, at Hargreaves Lansdown, says an increase in capital gains tax could make landlords leave the sector and leave renters struggling to find a place to live.

She said: “The prospects for renters could get even tougher in the coming months if buy-to-let landlords take fright at rumours of a possible capital gains tax hike.

“If Rachel Reeves boosts the CGT rate to match income tax, a property investor who pays higher-rate tax would see their tax bill rise by two-thirds when they come to sell. This could encourage more landlords to sell up before any potential change comes in, cutting the number of rental properties again.

“This is likely to push up rents even further, taking a horrible toll on tenants.”

The news comes after a survey by Quilter, a wealth management and financial advisory firm, reveals UK landlords could be £11,000 worse off on average if capital gains tax (CGT) rates are adjusted to match income tax rates.