Capital Gain Tax calls form core budget proposal
Details plans to make Capital Gains Tax fairer for landlords are at the heart of our budget submission, submitted to the Treasury this week ahead of next month’s Budget.
We are asking the Government to resist calls to equalize Capital Gains Tax with Income Tax levels and develop a tax system that supports the private rented sector (PRS) and encourage landlords to remain in the sector and continue to invest, while boosting growth across the economy.
In the document we argue a vibrant and healthy private rented sector is critical to delivering the Government’s ambition of “growth in every postcode” and call for the reversal of the freeze on Local Housing Allowance (LHA) rates.
What does the NRLA submission look like?
For decades people looking for a quick tax fix have argued for rises in Capital Gains Tax to match Income Tax. We oppose this – although we understand why its apparent simplicity has appeal.
Any rise in CGT on second homes could only be acceptable and workable if it was part of a wider package of reforms.
We don’t think the current CGT regime is working well for landlords or the economy either.
Between 2015 and 2024 average UK house prices increased by 46.2% while general inflation rose by 34%.
Our analysis shows that real house price growth over that period was just 9.1%.
Under current arrangements around four-fifths of the tax paid on capital gains in that period reflected inflation, not real growth in value.
In our budget submission we propose reforms to CGT that take into account the original purchase price, Stamp Duty, other acquisition costs and improvements.
Tax relief could then apply, taking into account length of ownership: tax would be paid on real gains in value not on inflation. In examining the costs for these reforms, we have asked the Treasury to consider the wider economic benefits of a more dynamic market and the need for landlords to unlock capital, especially to invest in upgrading their homes to make them more energy efficient.
Reversing LHA freeze
Our submission also called for the reversal of the freeze of LHA rates – something the Prime Minster has previously called for.
Frozen LHA rates stop people on low incomes gaining access to the PRS, which in turn puts up councils’ temporary accommodation bills.
Investment in retrofit
Finally, our submission calls on the Government to invest in the workforce needed to retrofit our housing stock. This must be matched by a tax regime that incentivises investment.
The right partnership between the Government and the PRS has the potential to reduce emissions, grow the economy, and ensure warmer, fairer and more sustainable homes for the millions of households who rent.
Between now and Budget Day there will be much speculation about the changes the new Chancellor might make, set against a very challenging fiscal backdrop. We will be monitoring these closely at the NRLA, as well as telling you what the Budget means for you and your business when the time comes.
Join our webinar
We are running a free post-budget webinar, exclusively for members, the day after the Autumn Budget on October 29th. This will include a summary of the key announcements and their impact and insight on how best to prepare for upcoming regulatory changes.
For more information and to register to join click here.
To download a copy of the budget submission click the button below.
