An imminent alteration to the tax-free allowance for Capital Gains Tax is expected to cast a shadow over the property market, resulting in diminished transactions and potentially driving down prices. Landlords and investors, adopting a more cautious approach, are poised to navigate the new terrain.
This revelation comes courtesy of bridging broker Finbri, who conducted a survey among landlords on the matter. The findings reveal that a substantial 45% of landlords express concern, with 23% admitting worry and an additional 22% voicing strong apprehension over the Capital Gains Tax allowance.
The tax-free allowance for Capital Gains Tax experienced a reduction from £12,300 to £6,000 in April, with further shrinkage to £3,000 scheduled for 2024. Such measures will eat into the profits derived from property sales, stemming from house price growth.
“The introduction of the new CGT rate in April, combined with the previous mortgage interest relief restrictions and the augmented stamp duty rates, will significantly impact the profitability of landlords and investors during property sales,” commented the lender.
The private rental market assumes a vital role within the UK’s housing sector, furnishing individuals unable to purchase properties with a place to call home, while simultaneously serving as an income source for landlords. Nevertheless, landlords are grappling with mounting pressure due to the rising rates, which could potentially propel more of them towards exiting the market.
Alarmed by the financial strain, nearly half of landlords (44%) indicated their intention to offload their properties, in response to the combined burden of the stamp duty surcharge and the forthcoming Renters Reform Bill.
Data from HM Revenue and Customs exposes a £3 billion increase in Capital Gains Tax receipts over the past year, whereas stamp duty has only risen by £1 billion, underscoring the significant decline in the housing market.
Despite the prevailing concerns regarding the tax adjustments, a glimmer of optimism remains. A noteworthy 45% of respondents opined that now is an opportune moment to invest in the property market, with an equal proportion intending to make investments in 2023. Evidently, some are keen on capitalizing on the subdued property market to secure a favourable deal.