A report suggests that an increase in capital gains tax (CGT) in the Budget could lead to a decrease of nearly 1m landlord-owned properties over the next decade.
In a 2022 paper, Capital Economics, a top economic consultancy, predicted that a CGT hike would actually be a cost to the Treasury, as reported by .
Landlords currently pay 24 per cent on transactions, although at the time of the report the CGT rate on second homes was 28 per cent. The consultancy suggested that raising this to 40 or 45 per cent could result in a shortfall of 910,000 rental properties.
Capital Economics projected that the tax increase would lead to the sale of 790,000 properties and 120,000 fewer purchases.
While the tax hike itself would generate £16.2bn, this would be offset by a £26.1bn drop in income tax revenue as landlords exit the business.
Including changes to corporation tax and stamp duty, Capital Economics predicted that the Treasury would face a loss of £3.6bn.
The National Residential Landlords Association commissioned the report, which was first reported by the Times.
This comes as Chancellor Rachel Reeves is reportedly considering increasing CGT in the Budget to strengthen public finances.
The capital gains rate is currently 20 per cent on all chargeable assets other than residential property, where the tax is levied at 24 per cent on homes that aren't a primary residence.
Speculation is rife that the tax on second homes could see a significant hike, with figures suggesting an increase to as much as 39 per cent, although this was downplayed by Prime Minister Keir Starmer. At the Investment Summit on Monday, Starmer remarked "a lot of speculation is getting pretty wide of the mark".
Treasury analyses warn that the behavioural changes in response to Capital Gains Tax (CGT) hikes might curb the expected revenue since individuals may opt not to sell their assets. HM Revenue & Customs data indicates that a 10 percentage point rise in CGT rates might lead to a £2bn loss for the Treasury by the financial year 2027-28.
