Date Published 10 February 2023
Chancellor Jeremy Hunt announced in his Autumn Statement in 2022 that the current Capital Gains Tax allowance of £12,300 is being halved to £6,000 from April 2023 and then cut again to £3,000 from April 2024. That could mean an increased tax bill for many property owners planning to sell in 2023.
If a homeowner purchased the property for £200,000 and sold it for £250,000, the ‘gain' would be £50,000. That would mean the current taxable income for that property would be £37,700 (£50,000 minus £12,300 = £37,700) and £6,786 would be payable in CGT for a basic rate taxpayer. However, in the next tax year that taxable income for the same property would be £44,000 taking the CGT tax bill to £7,920.
Data compiled by the research consultancy BVA-BDRC for the NRLA shows that in the fourth quarter of 2022, 65 per cent of landlords said that demand for private rented housing had increased across England and Wales. This was up from the 56 per cent of respondents who reported an increase in demand during Q4 2021.
Despite strong demand, 30 per cent of respondents said they plan to cut the number of properties they rent in 2023. This is the highest level of planned disinvestment seen in more than 6 years according to the research. Just 9 per cent say they plan to increase the number of properties they rent out over the next 12 months, down from 14 per cent who said they would do so in Q4 2021.
The crisis facing renters in need of accommodation follows tax changes aimed at dampening investment in the sector. This has included restricting mortgage interest relief, a three per cent stamp duty levy on the purchase of homes to rent out and, the effective hike in Capital Gains Tax.
In summary, anyone looking to sell a property in 2023 is advised to sell quickly and complete the sale before the end of the current tax year at the end of March 2023.
