Landlords disposing of buy-to-let (BTL) properties have dodged a capital gains tax (CGT) hike in Rachel Reeves’ Autumn Budget as the Chancellor announced residential property rates would not change.
CGT on residential property will remain at the lower rate of 18% and the higher rate of 24%.
For the sale of other assets, such as shares, the lower rate of CGT will increase immediately from 10% to 18%, while the higher rate rises from 20% to 24%.
In the first Budget to be delivered by a Labour government in more than 14 years, Reeves said: “The UK will still have the lowest capital gains tax rate of any European G7 economy.”
To encourage business owners to invest in their companies, the lifetime limit for Business Asset Disposal Relief will be maintained at £1m. Business Asset Disposal Relief will remain at 10% this year before rising to 14% from April 2025 and 18% from April 2026.
The measures are expected to raise £2.5bn by the end of 2028/29, according to the Office for Budget Responsibility (OBR).
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No ‘selling frenzy’
Nigel Bishop of Recoco Property Search said: “The decision to not raise capital gains tax on residential property will have an immediate impact on the second home market as owners are now less inclined to sell their property.
“This could present new challenges for house hunters who were hoping for the increase in taxes to trigger a selling frenzy that would have created a larger pool of properties to choose from. As this is now not the case, previously hesitant buyers will be motivated to finally start their property search to avoid missing out.”
Nick Leeming, chair of Jackson-Stops, said: “We welcome the Chancellor’s decision to leave capital gains tax (CGT) on residential property and buy-to-let properties unchanged. With supply already tight across the rental market, increasing CGT would have likely discouraged landlords from maintaining or expanding their portfolios, adding further upward pressure to rental prices and impacting affordability for renters.”
Property investors did not escape unscathed, however. The Chancellor announced that the stamp duty surcharge on the purchase of second properties would be increased from 3% to 5% from tomorrow.
Meanwhile, the decision to scrap the non-dom tax regime will impact foreign investors’ decisions to invest in the UK property market, says Amy Reynolds, head of sales at Richmond estate agency Antony Roberts.
“The absence of tax benefits for non-doms may impact the high-end London market, traditionally popular with international buyers,” she said.
“Without the added tax advantages, fewer non-domiciled investors may consider London as favourably, potentially creating an opening for domestic buyers to secure property that might previously have been beyond reach.
“These policies together could lead to a modest cooling in the buy-to-let sector, with more landlords exiting or reconsidering new purchases. Overall, this budget isn’t as dramatic as feared from a property perspective,” she added.
