Property investors face renewed uncertainty over capital gains tax (CGT) as speculation grows over possible changes in next month’s Budget. The government is reportedly considering changes to CGT as it looks for additional revenue, with reports suggesting ministers could align CGT more closely with income tax.
Speculation amid public finance pressure
The speculation comes amid pressure on the public finances. Public sector borrowing reached £18.3bn in August, £3.5bn above official forecasts. Reports that the government could raise the £12,570 personal income tax allowance have also fuelled speculation over how it might fund the change.
For landlords and other property investors, any increase in CGT could influence decisions over when to sell assets. Higher CGT rates could also change investor behaviour.
Investors could delay sales
Susannah Streeter, chief investment strategist at Wealth Club, said: “Tax speculation is ramping up ahead of the Budget.” She said a potential increase in the personal allowance could increase pressure on the government to raise revenue elsewhere.
Streeter added: “If the government is looking to put more money into people’s pockets by reducing their income-tax bill, it would need to find the money elsewhere. CGT is increasingly being talked up as a potential source.”
For the property market, that could mean some landlords and investors delay disposals while they assess the tax implications. However, Streeter cautioned against making investment decisions based solely on speculation.
She said: “The old adage – don’t let the tax tail wag the investment dog – should still be adhered to when it comes to a broad investment strategy.”
The government has yet to confirm any increase in CGT.
