9:26 AM, 2nd October 2024, About 2 months ago 5
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Rumoured changes to Capital Gains Tax (CGT) in the upcoming Autumn Budget could see the average landlord being hit by a £15,000 CGT increase on the average buy to let property, research reveals.
Lettings and estate agent Benham and Reeves have analysed the CGT being paid by landlords at current tax thresholds and what would happen should thresholds match income tax.
With the average landlord remaining in the BTL sector for around a decade, those considering an exit today would have seen the value of their investment increase by £105,054 per property.
This equates to a profit – or gain – of £96,651 per property after accounting for buying costs such as stamp duty, selling costs such as estate agent fees, as well as the legal fees.
Marc von Grundherr, a director of Benham and Reeves, said: “Buy to let landlords have been targeted by a number of laws and legislative changes over recent years, all designed to reduce the profitability and tempt more landlords to quit the sector, thus, in theory, freeing up more stock for owner-occupier homebuyers.
“Whilst these changes have certainly caused some landlords to call time on their investment, it’s perhaps a tad over-enthusiastic to describe this trend as a mass exodus, and many landlords continue to see buy to let investment as an extremely worthwhile endeavour, with many more pivoting to limited company status in order to streamline their tax affairs.”
He adds: “However, our new Labour government has made it very clear which side of the fence they wish to sit, first with the introduction of the Renters’ Rights Bill, with it looking likely that further tax hikes are on the way in the Autumn Statement.”
The amount of gain differs by region, with the research showing that landlords in the East of England, London and the South East seeing the largest profits.
As a result, the average landlord across England exiting today would pay CGT to the tune of £16,857 per property at the basic income tax rate of 18% or £22,476 at the higher rate of 24%.
However, the Labour government is widely expected to announce changes to capital gains legislation in the upcoming Autumn Budget to match current income tax rules.
This would mean that landlords who fall into the higher rate of tax would be facing a CGT bill of 40% – 16% higher than the current tax threshold.
For higher rate taxpayers looking to exit, they would be hit with a CGT bill of £37,460 – £14,984 more than they would currently pay.
The increase for those at the basic rate is more marginal at £1,873.
However, with growing numbers of landlords using limited companies to manage their BTL portfolios, they would only pay corporation tax at 19% for companies with profits below £50,00 versus the 24% CGT rate for individual higher-rate taxpayers.
havens havens
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Sign Up11:06 AM, 2nd October 2024, About 2 months ago
The potential changes to Capital Gains Tax (CGT) could really impact landlords, especially those in higher tax brackets. If you’re considering selling your property, it might be wise to consult a tax advisor to understand your options. Switching to a limited company structure could help minimize your tax burden, as you’d pay corporation tax instead
Cider Drinker
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Sign Up11:13 AM, 2nd October 2024, About 2 months ago
Reply to the comment left by havens havens at 02/10/2024 - 11:06
It’s about time the landlords holding property in a limited company structure was treated the same as other landlords.
Better still, just have one tax for tenants to pay based on property value and rent paid and do away with all other taxes on rental properties.
Reluctant Landlord
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Sign Up19:27 PM, 2nd October 2024, About 2 months ago
Reply to the comment left by havens havens at 02/10/2024 - 11:06
not always. Depends when you bought the property. Can actually produce a bigger overall bill by moving to a Ltd company.
david porter
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Sign Up9:58 AM, 3rd October 2024, About 2 months ago
Many landlords routinely refinance their properties especially when buying an additional property.
If they were to sell up they would need to get a price which would enable them to pay off the mortgage and pay Capital Gains tax.
A significant increase in capital gains tax may well mean that there is more debt than the house could be sold for?
The Chancellor needs to bear this in mind
Northernpleb
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Sign Up10:15 AM, 3rd October 2024, About 2 months ago
In Reply to David
I don`t think they really care , Private Landlords are easy Targets for any form of money making schemes the Government and Councils can think off.