In a move that could reshape the UK’s private rental sector, nearly a million homes may disappear from the rental market if Chancellor Rachel Reeves proceeds with a rumoured increase in Capital Gains Tax (CGT), industry experts have warned.

The widely speculated tax hike, expected to be announced in Reeves’ upcoming Budget, has sparked concerns about its potentially severe impact on buy-to-let landlords. Consultancy Capital Economics estimates that over the next decade, more than 900,000 rental properties could be lost, with 790,000 sold off and a further 120,000 planned purchases of buy-to-let homes never materialising.

If CGT is aligned with income tax—as has been suggested—higher earners could see their tax rate on property sales soar from 24% to 45%. Critics argue that this could push many landlords to sell their properties, exacerbating the UK’s housing shortage.

Calls for Government Restraint

The Daily Telegraph, reporting on the findings, has launched a campaign urging the Labour government to “end its war on property investors” and warning that such policies could force responsible landlords out of the market, further reducing housing availability for renters.

Dominic Agace, Chief Executive of UK estate agency Winkworth, said the uncertainty surrounding Reeves’ Budget plans has already undermined confidence in the property market. “The first step has to be macro-stability and not intervening too heavily in the UK economy,” Agace stated. He added that the potential CGT increase could lead to wealthy international investors withdrawing from the London market, particularly those concerned about inheritance tax changes.

Agace also highlighted the need for reforms in the legal system, particularly in handling anti-social tenants, if the government moves forward with proposals to abolish no-fault evictions. “Otherwise, why would anyone want to remain a landlord?” he asked.

Sales Surge Expected

Simon Gammon, Managing Partner at Knight Frank Finance, predicted a rush of second homes and rental properties being put on the market if CGT rises. “Landlord purchases are already at a record low,” Gammon noted.

Data from Hamptons, a leading estate agency, supports this trend. Aneisha Beveridge, Head of Research at Hamptons, told The Times that buy-to-let investors currently account for just 10% of all property buyers, a historic low. “We’re likely to see the loss of another 30,000 rental homes across Great Britain this year, a trend that’s set to continue,” Beveridge added.

Renters’ Rights Bill Concerns

Propertymark, a leading property industry body, has also warned that many landlords may choose to exit the private rental sector or switch to short-term lets as the government’s Renters’ Rights Bill moves closer to becoming law. The combination of regulatory pressures and potential tax hikes could, they argue, further destabilise the rental market at a time when housing demand is already outstripping supply.

As the Budget approaches, all eyes will be on Chancellor Reeves to see whether she chooses to press forward with the CGT increase, despite growing calls to reconsider its impact on landlords and the housing market.