In today’s Budget announcement, the government increased capital gains tax (CGT) rates, with basic rate taxpayers seeing a rise from 10% to 18% and higher rate taxpayers from 20% to 24% on profits from share sales and other assets. However, the rate on residential property remains unchanged, holding at 18% and 24%, giving property investors slight relief but still burdening them with a 2% hike in stamp duty on second homes.
Capital gains tax hike challenges investor appeal
The increase in CGT is a significant blow for investors, who now face a higher tax rate on gains from non-property assets. Sarah Coles, Head of Personal Finance at Hargreaves Lansdown, commented on the impact: “This change is a blow for investors. It could have been worse, with suggestions of a doubling of the rate, but it’s scant consolation for anyone hit with a bigger tax bill.” Coles emphasised that this tax rise not only affects seasoned investors but may deter newcomers who feel uncertain about navigating additional tax risks.
She also highlighted how recent cuts to the tax-free allowance, now at £3,000, combined with frozen income tax thresholds, mean more people are paying CGT. “Talking about things like capital gains tax as ‘wealth taxes’ obscures the fact that many people on average incomes, who’ve invested carefully throughout their lives, can face a tax bill,” she added.
Stamp duty hike pressures landlords in rental market
The Budget introduced a 2% increase in stamp duty for second homes, which now sits at 5%. This change will impact landlords looking to expand portfolios, which could tighten rental supply further. Angharad Truman, President of ARLA Propertymark, expressed disappointment, saying, “It’s disappointing to see that the UK Government did not address this fundamental issue and instead announced yet another blow for landlords by increasing Stamp Duty on second homes.”
With demand for private rentals on the rise, many worry this will push landlords out of the market, reducing housing options and driving up rents for tenants. Emma Cox, MD of Real Estate at Shawbrook, highlighted the sector’s importance, stating, “Demand far outweighs the supply of quality homes, and tackling this will be extremely difficult if landlords are disincentivised by government measures.”
Industry leaders seek clarity on long-term property policy
With increasing calls for government support, the industry is pressing for a stable, long-term property strategy. Nick Sanderson, CEO of Audley Group, stressed the need for planning reforms that prioritise affordable and age-specific housing: “Planning policy will continue to haunt the government if it ignores the need for reform. There must be a clear commitment to the types of homes that will be built.”
Allison Thompson, National Lettings Managing Director at Leaders Romans Group, added that the market needs support for sustainability requirements, such as upcoming EPC grade targets for rental properties, which could otherwise result in high costs for landlords. “The housing crisis cannot be solved by simply managing exits from the market; we need active measures that attract new investment, protect existing rental supply, and ensure both landlords and tenants can thrive,” she said.
As the property sector responds to these new measures, industry leaders argue that comprehensive policy support is crucial for landlords and investors to sustain the property market’s growth. With predictions of further interest rate cuts, the Budget presents both challenges and opportunities, underscoring the need for strategic government support to help UK property investors and landlords weather the changes.
