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Landlords to Reap Capital Gains Tax Cut, Yet Still Face Hefty Exit Fees

Starting from 6th April 2024, landlords contemplating selling their properties will encounter a slight reduction in capital gains tax, offering some financial reprieve. Zero Deposit’s latest findings highlight a 4% decrease in the capital gains tax rate, from 28% to 24%, potentially saving the average landlord £4,468 per property. Despite this reduction, the exit cost for landlords is anticipated to be a substantial £26,806 per property, underlining the significant financial commitment involved in leaving the buy-to-let market.

A Decade of Growth and the Tax Implications
Over the past ten years, the UK’s average property value has surged by 65%, equating to an increase of £111,693. This remarkable growth spells a substantial capital gains tax bill for landlords at the current rate of 28%, averaging £31,274. However, the impending tax rate adjustment to 24% means a slightly less daunting figure of £26,806, offering landlords a modest saving when choosing to divest.

Regional Disparities in Capital Gains
The impact of the forthcoming tax adjustment varies significantly across the UK, with London’s landlords poised to benefit and bear the brunt the most. They can expect to save £7,634 in capital gains tax per property, yet still owe £45,806, even after the reduction. In contrast, the South East and the East of England are regions where landlords will see considerable savings, though in the North East, where property appreciation has been more modest, the savings will be a mere £1,658.

Industry Perspectives on the Budget Changes
Sam Reynolds, CEO of Zero Deposit, voiced mixed feelings about the recent budget announcement. While acknowledging the capital gains tax cut as a welcome surprise for landlords, Reynolds critiqued the government’s broader strategy towards the buy-to-let sector. The successive legislative changes aimed at reducing profitability, coupled with the now more appealing exit route due to the tax cut, seem contradictory to encouraging long-term investment in rental properties. Despite the tax reduction, landlords are still left with significant government levies on their investments, highlighting the ongoing challenges within the property market.


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