Plan Insurance Blog

Landlord Numbers Culled By Capital Gains Tax Threat

Its being reported that the continued threat of an increase in capital gains tax (CPT) is resulting in higher numbers of buy-to-let landlords exiting the housing market.

There was a sense of relief that last month’s budget did not include a substantial hike in CPT. Chancellor Rishi Sunak had been predicted to raise the 20% CPT rate substantially by bringing it in line with income tax rates. But the change did not come about. However the threat remains!

The chancellor Rishi Sunak has been evaluating capital gains tax levels since the Summer of 2020. Concerns are that an increase is on the way at some point to help pay for the enormous emergency expenditure during the Covid crisis. Accountancy firm BDO commented this week that, “If the economy does boom after lock-down perhaps major tax rises will not materialise. However, if the Government’s finances still look strained at the time of an autumn Budget, there may well be tax rises.”

According to property portal Zoopla, since Mr Sunak’s review was announced, the number of homes put up for sale that had previously been rented has increased in every area of the country. Dramatic year on year rises of over 50% have been seen in London and the South East.

It’s likely that landlords have been reassessing their property portfolios in light of the pandemic. Potential changes to taxation levels have played a part in this. There have also been shifts in the rental market with tenants looking further afield following the shift to remote working. Demand created by the stamp duty holiday is another factor that is likely to have influenced decisions to sell. Zoopla estimates around 234,000 buyers, who had already agreed a sale are expected to benefit from the tax relief being extended to the end of June, a measure that will save them a combined total of almost £1 billion.

The stamp duty holiday resulted in a record number of transactions in March. The 180,690 noted transactions was the highest monthly total since figures begun being published in 2005. It was also double the previous years tally. Experts fear the stamp duty holiday is creating a bubble following average house price increases of nearly 9% (according to the Office for National Statistics).

Zoopla also revealed that the Covid restrictions have predominantly driven demand from homeowners in older age brackets. They have pushed mortgage free purchases in 2020 to over 30% of all transactions which is the highest ratio in over a decade. First-time buyers made up just 31% all acquisitions which was a 5 year low. Though with more government assisted 5% deposit mortgages being introduced by lenders this trend is expected to reverse.

Find out why 96% of our customers have rated us 4 stars or higher by reading our reviews on Feefo.

To get a quote give our specialist teams a call on 0800 542 2743 or request a Call Back.

Already a client? Why not recommend us to your contacts in exchange for a £50 discount off your renewal with our Refer a Friend scheme?