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Capital Gains Tax Forcing Landlords to Quit in Record Numbers

Posted on January 6th, 2023

The reduction in landlords’ Capital Gains Allowance has triggered a sell-off by landlords at a 13-year high according to new figures.

Last month Chancellor Jeremy Hunt announced that the amount you can make from the sale of certain assets before paying tax will fall from £12,300 to £6,000 in April 2023 and then to a mere £3,000 in April 2024.

Tom Cranenburgh from the GetAnOffer Estate Agency says this has sounded the alarm for many landlords.

“The changes to Capital Gains Allowance couldn’t really have come at a worse time for landlords. Right now many are already facing a reduction in property values, rafts of new regulation and the prospect of many of their tenants struggling to pay their rent due to the cost of living crisis.

“That’s why many are reacting to this unwelcome blow by already opting to quit the market and sell up.”

Cranenburgh continues: “We track all enquiries really carefully, and landlords looking to sell are coming to us more than I can remember since we began back in 2009. Some are hoping to sell with tenants remaining, others have given two months notice and want the place sold as soon as it’s empty to avoid paying all the costs with no rent coming in.

“Landlords looking to sell are up nearly 65 per cent in November versus October and nearly 300 per cent versus November 2021.”

Basic rate taxpayers pay 10 per cent CGT on most asset sales and 18 per cent on property. Higher rate taxpayers pay 20 per cent CGT on most assets and 28 per cent on property.

A landlord paying higher-rate tax would pay up to £1,764 more tax on a property gain above the threshold if they sold between April 2023 and April 2024 (when the threshold is £6,000), and up to £2,604 more after the threshold drops to £3,000, according to the investment platform AJ Bell.

A landlord paying basic-rate tax would pay up to £1,134 more in CGT if they sold their property between April 2023 and April 2024, and up to £1,674 extra from April 2024.

Landlords who manage their buy to let portfolio through a limited company and pay themselves in dividends will also be hit by changes to the dividend allowance, which is the amount that an individual can receive in dividends before paying tax on them. That allowance will be cut from £2,000 a year to £1,000 in April, and then halved again to £500 in April 2024.

In the autumn the number of limited companies set up to hold buy to let properties passed 300,000 for the first time as more landlords moved properties from personal to company names.

Article from Landlord Today

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