UK landlords selling up to avoid capital gains tax increase ahead of budget

Fears that capital gains tax may be increased in the autumn budget could be driving more landlords to sell up, data from property portal Rightmove (RMV.L) suggests, as the proportion of former rental homes going up for sale has reached a record high.

The data showed that nearly a fifth (18%) of homes were previously available to rent, up from 14% a year earlier, and 8% in 2010.

Rightmove said that one potential driver is a mooted increase in capital gains tax in the government's budget on 30 October. The tax is levied on profits made from the sale of assets, such as a second home.

There is currently a £3,000 tax-free allowance on capital gains, after which there is an 18% capital gains tax applied on residential property sales for basic rate taxpayers and 24% for those in the higher rate tax band. The Treasury has reportedly drawn up plans to align capital gains rates with income tax.

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The trend was most prominent in London, where nearly a third (29%) of all homes for sale were previously available on the rental market. That was followed by Scotland, where 19% of former rental homes were going up for sale.

Rightmove said that this trend had been slowly rising for many months, and that the previous five-year average for homes switching from the rental into sales market was 14%. It also pointed to a surge in new seller activity following the Bank of England's interest rate cut in August for the first time since March 2020.

Tim Bannister, property expert at Rightmove, said: "Despite the trend of more landlords choosing to sell up, it doesn’t appear to be a mass exodus, and we will need to monitor the longer-term impacts of what happens to the rental supply that is put up for sale."

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He said these homes could provide first-time buyers with more choice.

"They might also be purchased by other landlords and put back into the rental market, which would signal a changing of the guard rather than a complete exit from landlords," Bannister added.

Angharad Trueman, president of professional body ARLA Propertymark, said: "Current government policy continues to risk squeezing good landlords out of the sector with ever-increasing demands from new and amended legislation, taxes and other financial hurdles, ultimately making finding and affording a home increasingly difficult."

"With the social rented sector at full capacity and the prospect of buying a home out of reach for many, the private rented sector needs to be better sustained and nurtured."

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