The Autumn Budget is just days away, and speculation about whether the Chancellor will announce any changes impacting landlords is growing. One proposal – offering a Capital Gains Tax break to landlords who sell their property to their long-term tenant – appears to be a likely announcement.
On the face of it, this is an interesting strategy. Younger people are finding it increasingly more difficult to buy their own home because property prices have grown at a far higher rate than wages. Meanwhile it is this generation which is more likely to vote Labour and who voted Remain in the 2016 EU Referendum. The result is that younger people are feeling disengaged with current politics, making this a crucial Budget if the Conservatives are to win new, younger voters in the next General Election.
Under the proposed policy, if the tenant has been renting their home for three years or more, and the landlord sells the property to them then the landlord won’t be liable for the 28% Corporation Tax bill on the growth in the value of their property. The landlord and tenant will share this windfall, which could see each of them better off by around £7,500.
Whilst this appears generous, we fear it could cause real damage to the Private Rented Sector.
The proposal provides no incentive for landlords to re-invest in the Private Rented Sector. Indeed, because of the increased stamp duty on second homes and the phasing out of mortgage interest tax relief, it’s doubtful that any landlord taking up this offer would buy another investment property. This means if the policy is “successful” it won’t see any new homes being made available, but instead would see the supply of properties available to rent reduce. A shrinking supply against a backdrop of growing demand is only going to see rental prices rise.
Therefore, we’re repeating our calls for the Chancellor to give landlords a break in the Autumn Budget on 28th October, and we are pleased to see the National Landlords Association has mirrored our calls.