Property investors and buy-to-let landlords may still face increased capital gains tax (CGT) bills following this month’s Budget, despite reports that Chancellor John Healey has ruled out a major increase. The Financial Times, citing four sources, reported that Mr Healey will not bring CGT into line with income tax.
However, a smaller increase in CGT remains a possibility ahead of the 28 October Budget. This uncertainty means landlords and second-home owners could see a rise in the tax payable when they sell investment properties.
Currently, CGT on residential property is 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. Aligning CGT with income tax could have led to significantly higher bills, as higher-rate taxpayers currently pay 40% income tax.
Economists have cautioned that higher CGT rates might deter investors from selling assets. Some property owners could choose to retain investments rather than incur a larger tax liability, potentially affecting the number of buy-to-let properties entering the market.