- Readers Rating
- No Rating Yet!
- Your Rating
Proposals to increase Capital Gains Tax would freeze the rental housing market making it less responsive to tenant demand, the National Residential Landlords Association has warned ahead of this year’s Budget.
Last year the Office of Tax Simplification, which gives independent advice to the Government, a review setting out ways in which CGT and income tax could be more closely aligned.
‘If the Government considers the simplification priority is to reduce distortions to behaviour, it should consider either more closely aligning CGT rates with income tax rates, or addressing boundary issues as between CGT and income tax’, said OTS tax director Bill Dodwell.
In its submission ahead of 3 March, the NRLA agreed that CGT can distort behaviour and pointed put that 72 per cent of private landlords have said the tax is a major disincentive to sell property on the open market.
‘Increasing it would serve to freeze the market making it far less responsive to changing needs from renters’, said NRLA. ‘This includes the shift in demand out of city centres to properties in suburbs, towns and villages, as noted by Rightmove’.
Further, almost half of landlords entered the market to contribute to their pensions, meaning an increase CGT to put it more into line with income tax would impact on their retirement planning. ‘For many this is predicated on liquidating assets to fund their later life, including in many cases their care costs’.
Rather than developing ‘yet more punitive tax hikes on the rental market’, the Chancellor could use the tax ‘more smartly’, it suggested. To support the Government’s ambitions for homeownership there should be a CGT exemption or reduction where landlords sell properties to sitting tenants, it proposed.
‘Increasing Capital Gains Tax would reduce churn in the rental market undermining the flexibility it has always been good at providing’, said NRLA chief executive Ben Beadle.
‘A tax hike would be a kick in the teeth for all those who have invested in property to provide security for the future for themselves and their families.
‘The Chancellor needs to end the war on the rental market and recognise the importance of a healthy and vibrant rented housing sector. Tax should be used more smartly, not as a blunt attack on the market’.
The NRLA has also called on the Chancellor to scrap the 3 per cent stamp duty levy on the purchase of homes to rent, and reconsideration of the complete removal of mortgage interest relief for landlords – a change that will not apply to holiday lets.
‘Supporting growth in the private rental market, alongside all other housing types, would provide a significant boost to the economy in the midst of the COVID-19 pandemic. Research published last year suggests that landlords inject over £3.5bn into local businesses across the UK’, said Beadle.
‘To be taxing long term homes to rent less favourably than holiday lets is simply bizarre. It completely undermines efforts by the Government to encourage the provision of long term, secure housing.
‘It is time for the Government to realise that its tax policies have created a shortage of rented housing. This can only mean higher rents and reduced choice for renters. This is not going to do much for the levelling up agenda’.