Most landlords will face higher CGT bills from April

April will bring a surge in Capital Gains Tax (CGT) bills for landlords, with 89% of higher-rate and all lower-rate taxpayers being affected, research from Hamptons reveals.

That’s because the annual personal allowance for capital gains is set to drop from £12,300 in 2022/23 and £6,000 in 2023/24 to just £3,000 in 2024/25.

Those reductions offset the CGT rate being cut from 28% to 24% announced in the Spring Budget, so most higher-rate taxpayers will see their CGT bill increase by £454 or 4% in April.

Lower-rate taxpayers will face an average increase of £1,674.

Capital gains tax changes will act as a disincentive

The head of research at Hamptons, Aneisha Beveridge, said: “Although the Chancellor made it clear he was hoping to encourage landlords to sell up and add new housing supply into the market for first-time buyers, the reality is that the capital gains tax changes taken as a whole will likely act as a disincentive.

“Most landlords leaving the market this year will end up paying more tax than two years ago, not less.”

She added: “Recent changes to CGT will hit landlords making the smallest gains hardest.

“Typically, these will be newer millennial investors who have seen less price growth, or those selling cheaper homes in less expensive parts of the country.

“Meanwhile, older investors who’ve been landlords for longer and have accumulated bigger gains are much more likely to benefit from the tax cut.”

Chancellor’s changes to CGT rates

Ms Beveridge continued: “The Chancellor’s changes to CGT rates only apply to higher-rate taxpaying landlords with homes in their own names.

“Meanwhile, the growing number of investors with homes held in companies pay corporation tax on their sale proceeds after costs instead.

“While tax efficiency has been the major draw of a company structure, increasingly it’s also the certainty and stability it offers.

“Chancellors’ have generally proved less likely to tinker with company tax rules than individuals.”

Landlords with a capital gain of less than £68,000

The data also shows that landlords with a capital gain of less than £68,000 will be worse off than two years ago.

In 2023, landlords typically sold their buy to let properties for £110,000 more than the purchase price.

New landlords and investors in the North, who usually make smaller gains, will see the largest increase in CGT bills.

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