Capital gains tax: landlords await Budget confirmation on reported rate freeze

What happened

Capital gains tax may escape an increase in the 28 October Budget, according to Financial Times and Times reports cited by Property Reporter. The reports say Chancellor John Healey has decided against raising the tax. The Treasury has not confirmed that position, leaving landlords without an official announcement on the treatment of future property gains.

Property Reporter describes the forthcoming statement as Healey’s first Budget under prime minister Andy Burnham. For owners considering selling a buy-to-let property or second home, the immediate distinction is between a reported decision and a published tax measure. Neither the newspaper coverage nor the investment industry’s response establishes what the final Budget will contain.

Capital gains tax applies to taxable profits from selling assets, including investment properties, rather than to the whole sale price. Property Reporter cites a 24% rate for higher-rate taxpayers’ residential property gains and an 18% rate generally applying to basic-rate taxpayers. The report notes that income and the size of the gain affect the calculation, so a seller’s income-tax band alone does not determine the bill.

The reported decision concerns an increase in capital gains tax, not a general exemption for landlords or a reduction in their existing liabilities. Property Reporter also says it does not rule out other property-related tax changes. Owners therefore cannot treat the coverage as confirmation that every part of the tax position affecting a rental investment will remain untouched.

The background

The argument against a higher rate centres on how investors might respond, according to Property Reporter. Officials reportedly believe some would postpone asset sales, while others might leave the UK. In that assessment, a higher tax rate could produce fewer taxable transactions rather than the additional revenue implied by applying it to an unchanged number of sales.

HMRC previously estimated that increasing the higher rate by 10 percentage points could reduce receipts by £3.6bn in 2028-29, according to the report. That estimate incorporates expected changes in taxpayer behaviour. It is a forecast about a particular rate increase, not a calculation of the revenue effect of every possible capital gains tax reform.

Healey had already rejected proposals to bring capital gains tax rates into line with income tax, Property Reporter says. The report gives the additional income-tax rate in England, Wales and Northern Ireland as 45%, illustrating the difference that supporters of alignment wanted to address. Applying income-tax rates to gains would be a different policy from a smaller increase within the existing capital gains tax structure.

The dispute also sits alongside a separate debate about how long-held property investments should be taxed. Property Pulse UK has covered the NRLA’s call for inflation relief on landlords’ capital gains. A decision about headline rates would not, by itself, answer that different question about the treatment of gains built up over time.

For a landlord, tax on disposal is distinct from the return earned while a property is let. Rental yield relates rent to the property’s price or value; it does not show the eventual capital gains tax liability. The distinction matters when reading reports about flat rental yields and the relationship between rents and purchase prices, because an income measure is not a complete account of an investment’s after-tax outcome.

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What people are saying

The Treasury’s position remains procedural rather than a confirmation of policy. A spokesperson told Property Reporter that the Chancellor sets out tax decisions at fiscal events and that the department does not routinely respond to speculation or proposals. That response neither verifies the reported freeze nor supplies details on the wider package being prepared for the Budget.

Political opinion has been divided, according to Property Reporter. Louise Haigh and Wes Streeting supported an increase before Burnham became prime minister, with supporters arguing for a smaller gap between the taxation of investment gains and earnings. Caitlin Boswell, deputy director of Tax Justice UK, criticised the reported decision, while Lord O’Neill of Gately, the former Goldman Sachs chief economist who has advised Burnham, opposed an increase.

Michael Healy, chief executive of IG Consumer, welcomed the reports and argued for greater consistency in investment taxation. His concern extended beyond enacted changes: he said proposals, reversals and pre-Budget leaks also make long-term planning harder. He urged the government to commit to stable rules, presenting predictability as a way to encourage investment rather than simply calling for the avoidance of one tax rise.

Rob Morgan, chief investment analyst at Charles Stanley Direct, part of Raymond James, said the reports would reassure investors and business owners. He linked the apparent approach to concerns about delayed disposals and international competitiveness. Morgan also cited the debate around non-dom reforms as a reason to consider how internationally mobile taxpayers might react, rather than assessing a tax increase solely by its headline rate.

Chris Mason, chief operating officer at The Letting Partnership, said avoiding alignment with income tax would benefit landlords with substantial property gains. He estimated that alignment could add more than £15,600 to an additional-rate taxpayer’s bill on an average property, although the source does not provide the underlying calculation. Mason also pointed to the combined effect of financial pressures and changes under the Renters’ Rights Act, arguing that avoiding a capital gains tax increase would not resolve landlords’ wider concerns.

What happens next

The next scheduled point for an official tax announcement is the Budget on 28 October, according to Property Reporter. Any measures announced would need to be read for their scope and effective dates before being applied to a particular sale. The current report supplies no confirmed new rate, commencement date or transitional arrangement for residential property disposals.

Other revenue measures remain part of the reported Budget plans. Property Reporter says a higher rate on bank profits is expected to be the largest revenue-raising measure, with proceeds intended for cost-of-living support for households and businesses. That is another reported proposal, not a confirmed funding package, and the article gives no rate or expected yield.

Healey emphasised business profitability and investment in a speech the previous month, according to Property Reporter. That provides context for the investment industry’s response, but it does not establish the contents of the Budget. The wider question of how fiscal proposals affect housing is also covered in Property Pulse UK’s report on calls for OBR checks on Budget housing measures.

For an owner weighing up a sale, an unchanged headline rate would still leave the individual tax calculation to resolve. Capital gains tax generally concerns the gain after applicable costs, allowances and reliefs, rather than the cash left after repaying a mortgage. The figures in the report are therefore not enough to calculate a particular landlord’s liability or establish whether bringing forward or delaying a disposal would be beneficial.

Why this matters

For landlords and second-home owners, the reports suggest that one possible increase in selling costs may not materialise. But the Treasury has not confirmed that outcome, and Property Reporter says other property-tax changes remain possible. The practical distinction is between reassurance about a headline rate and certainty about an individual bill. Owners considering a disposal still need the official Budget position and a calculation reflecting their own gain, costs, allowances and reliefs.