How much landlords will pay under new CGT rules revealed

How much landlords will pay under new CGT rules revealed

9:12 AM, 30th November 2022, About 2 years ago

Text Size

Changes to capital gains tax (CGT) announced in the recent Autumn Statement will see the average landlord pay up to £1,764 more if they exit the BTL sector in the 2023-24 tax year, research reveals.

That’s according to the London lettings and estate agent, Benham and Reeves, after it analysed the capital gains seen on a buy-to-let investment in each of England’s counties over the last nine years.

The period is the average length of time a landlord owns their portfolio – as well as the current tax payable if they exit at both the basic and higher rate of tax.

They also wanted to see how this differs from what they will pay once changes to the capital gains tax allowance come into force from next year.

Average landlord has seen capital gain to the tune of £130,000

The research shows that with the average house price in England of £314,278, the average landlord has seen capital gain to the tune of £130,000 over the last nine years – based on the latest Land Registry house price data.

With the current capital gains allowance of £12,300, this would mean £117,704 of this £130,000 increase in property value is currently liable for capital gains tax.

As a result, the average landlord offloading their portfolio and paying the basic rate of tax would pay £21,187 in capital gains tax today.

This figure climbs to £32,957 for those paying the higher and additional rates of tax.

However, with the capital gains allowance now dropping to just £6,000 for the 2023-24 tax year, the average landlord looking to sell their portfolio would be facing a bill of £22,321 at the basic rate and £34,721 at the higher and additional rates of tax.

This means that those on the basic rate of tax will see their potential capital gains tax bill climb by £1,134, while those paying the higher and additional rates of tax will see an increase of £1,764.

Where the highest capital gains tax bill is

When these changes come into force next year, it’s not London that will be sitting at the top of where the highest capital gains tax bill is concerned, but Surrey.

Landlords in the county looking to exit the market would be facing a capital gains tax bill of £38,167 at the basic rate and £59,371 at the higher and additional rates based on the capital appreciation of their investment over the last nine years.

London ranks second, however, with those paying a basic rate of tax facing a capital gains tax bill of £36,922 when exiting the buy-to-let sector with the new changes in place, while those paying the higher and additional rates of tax will pay £57,435.

Buckinghamshire, Hertfordshire, Bath and North East Somerset, Bristol, Essex, Oxfordshire, Kent and West Sussex are also home to some of the highest capital gains tax bills once capital gains tax changes are implemented.

‘Understandable that many landlords feel a little aggrieved’

Marc von Grundherr, a director of Benham and Reeves, said: “Given the fact that the government has consistently refused to address the housing crisis and instead persisted in fuelling demand in order to keep house prices soaring, it’s understandable that many landlords feel a little aggrieved at having to pay such a hefty lump in tax simply because the value of their investment has soared.

“This tax bill has only grown all the larger as a result of the Autumn Budget and the latest government attack on the nation’s landlords in the form of a reduced capital gains tax allowance.”

He added: “Buy-to-let remains one of the safest investments you can make, and the right investment is still incredibly profitable.

“So, the latest hikes to capital gains tax are unlikely to deter both the institutional and amateur investor.

“However, it’s clear the government is intent on reducing this profitability and one must wonder just how many government cash grabs the nation’s landlords are willing to take before they decide enough is enough and exit the sector.”

Book a Landlord Tax Planning Consultation

  • Hidden
  • Hidden
    Please provide an overview of your circumstances and what you are looking to achieve.
  • For the avoidance of doubt, we are able to assist landlords who own properties in England, Northern Ireland, Scotland and Wales. Where you reside is not a problem, even if you are resident outside the UK.
  • Landlord Tax Planning Consultancy is the core business activity of Property118 Limited (in association with Cotswold Barristers).

Share This Article


Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership

or

Don't have an account? Sign Up

Landlord Tax Planning Book Now