Most landlords would have to fork out an extra £6,800 in tax when selling up if the Chancellor hikes up the rate of capital gains tax (CGT) to bring it in line with income tax during his March 3rd budget.

Hamptons International says the average landlord who sold their buy-to-let property in England and Wales this year made a gross capital gain of £69,000, having owned it for nearly ten years.

For a higher rate taxpayer, the increase in CGT tax rate – from 28% to 40% – would see their bill go up from £15,880 to £22,680 – assuming they can make use of their £12,300 CGT allowance. For a lower rate taxpayer, the CGT bill will rise from £10,210 to £11,340.

In another tax hit, Rishi Sunak is expected to raise corporation tax from 19% to as much as 24%, which will mean it would no longer be worth incorporating properties for some landlords.

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Tax crackdowns

Record numbers made the switch last year after previous tax crackdowns have made it increasingly unprofitable to own a buy-to-let in their personal name; according to Hamptons International, about 229,000 buy-to-let businesses are now run using a company,

Under this new regime, buy-to-let owners who’ve moved their property into a company structure would see their corporation tax bill jump by more than a quarter, says Hamptons.

The average limited company landlord who owns one buy-to-let worth £190,000 will see their annual tax bill rise 26% from £968 to £1,223. 

This means their annual net profit will fall from £4,129 to £3,874 – still outweighing a higher-rate taxpayer who owns their buy-to-let in their personal name who would earn a net profit of about £3,203. 

cgt

Head of research Aneisha Beveridge (pictured) says: “Most landlords will still benefit from incorporating, but they’ll have to do their homework on the additional costs associated with setting up and owning a limited company buy-to-let portfolio.  It does mean however, that for low-rate taxpayers, it’s probably not worth it.”

Visit Hamptons International.

7 COMMENTS

  1. Drive faster than 70 mi/hr and your punishment includes a financial element. The message is clear — slow down.

    Sell your property, and the stress includes a financial element, The message is clear — be financially static.

  2. First they came for the landlords with personal portfolios, then they cam for the landlords with limited company portfolios. There is nowhere to run, nowhere to hide – from this slimy bunch of so-called conservatives hell-bent on destroying the private landlord sector altogether to get votes from young people in the future.

    • The reason anyone went into property is to make a profit-if you cant profit then time ti get out quickly and more your capital into maybe cryoto, online business or become a property Guru selling courses – more profit less hassle and regulation…

  3. Being a Landlord for nearly 30 years ,the name has never become so degrading and a target for the government.With so much red tape and H&S .You wonder how anyone living in a non rented home manages to survive!!! Don’t start me on selective licensing!!The modern day Robin Hood!!

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