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.”

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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.”

Entrepreneurial spirit

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.”

4 COMMENTS

  1. it is time for the British Public to understand why rents are increased as it is always blamed on to the landlord for being greedy.the fact is that it is all down to of government implementation of new regulations that is costing landlords extra money and like everything else these extra costs must be added on and this is the reason why I rent has increased over the years and I am absolutely fed up of landlords getting the blame when it is actually down to the government by introducing section 24/ the electrical certificate that is required / and Tenant Fees Act 1st June 2020. plus reducing people’s housing benefit which left a lot of tenants falling into rent arrears and being evicted. this is one of the reason why private landlords does not accept DHSS tenants.and now the capital gains increase I believe it’s now time for landlords to speak up or sell up I myself am not prepared to do a lot of work with very little reward why the government is enjoying my hard-earned money in tax I mean let’s be honest we cannot claim for lost rent as we all know it could take up to 8 months to get somebody evicted. tenants are given more rights than landlords .

  2. I’ve commented on other similar articles but I wonder if this is ‘fake news ‘ hate to use that us term just to get a different Agenda Into Johnson new team

    If it was proposed fir next April some would sell up if not tied to fixed term tenant or mortgage and depress the market worsening the housing market outlook stopping building ( which planning easing is supposed to kickstart ) and unsettling homeowners . But maybe it Cgt fir housing investment sales was reduced for 6 months more investors would come in – and then hike cgt after once you’d caught more fools. I’m smarter than demonic Cummins … 🤔

  3. I disagree with what the guy in this article is saying. It makes no logical sense to me:
    Let’s assume more taxes are placed on investment properties.
    I agree, some landlords will be encouraged to sell their properties.
    But who will they sell them to?
    The properties won’t disappear.
    There will still be the same number of people needing to be accommodated.

    Why would it disrupt the building / renovation industries?
    First time buyers are probably more likely to renovate their houses than landlords. Certainly to a greater degree, as it is their own home.

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