Small landlords could be in for a bumpy ride over the next few years as the Government looks to recoup debts incurred during the pandemic.
Magnet Properties MD Jonathan Schuman reckons the proposed increase in Capital Gains Tax (CGT) rates could be the thin end of the wedge as property becomes an even bigger target.
“The Government seems intent on driving small landlords out of the marketplace,” he tells LandlordZONE.
“I expect we’ll see further tax hikes within two to three years, possibly a wealth tax on property, which would be even more insidious and would push people over the edge from a liquidity point of view.”
Rush to sell
Schuman, who has a portfolio of 250 residential and 100 commercial properties, says proposals to raise CGT rates up to the levels of income tax – so that higher rate taxpayers face a flat rate of 40 or 45%, while reducing the annual CGT allowance threshold from £12,300 to £5,000 or less – would create a rush to sell properties as those affected cash in before the changes.
Small landlords would be hit hardest after already enduring stamp duty hikes and the loss of mortgage interest relief.
Higher taxes would lead to a sharp but short-term fall in property prices, before clogging up the market and leading to more expensive homes, he says.
“Landlords will be rushing to sell before the CGT rise, but after, higher taxes would be a big incentive to hold onto properties, drying up supply and keeping prices high.”
Schuman believes more punitive tax measures on the private rented sector will impact not just landlords, but also the many related businesses who depend on it such as builders and DIY companies.
He adds: “The entrepreneurial spirit of property is very important to the economy – if you’re stifling people dabbling in property there will be less reason for them to do it.”