Capital gains tax reform: NRLA seeks inflation relief for long-term landlords

What happened

Capital gains tax reform should give landlords relief for inflation and recognise properties kept in use as accommodation, according to the National Residential Landlords Association (NRLA). The association argues that taxing increases in property values without an inflation adjustment discourages investment in rental homes. Its proposal is a request for a change in tax policy, rather than an announcement of new rules.

In the call reported by Property Reporter, the NRLA asks the Chancellor to address the issue through a Budget statement. The supplied report has no publication date, so that reference cannot reliably be tied to a forthcoming Budget. It also contains no Treasury response, government commitment or timetable for introducing the suggested relief.

The first part of the proposal would adjust a property's purchase price and qualifying capital expenditure for inflation before calculating the taxable gain on sale. According to the NRLA, this would distinguish an increase in spending power from a price rise that merely reflects inflation. Genuine gains in value would remain taxable, so the association is not asking for a blanket exemption for rental property sales.

The second part would link relief to the time a property is held and used to provide accommodation. The NRLA says a short-term speculative purchase and resale would receive no relief, making the distinction about use as well as ownership. The account does not set out a minimum qualifying period, a relief schedule or the evidence landlords would need to establish eligibility.

The background

The NRLA bases its inflation argument on research covering house price changes between 2015 and 2024. It says only one-fifth of the increase represented growth after accounting for inflation, with the remaining four-fifths attributable to rising prices across the economy. That is a finding about a historical period, not a forecast for property values or a calculation of any individual landlord's tax bill.

In general UK tax terms, capital gains tax concerns the gain made when disposing of an asset, rather than the full sale proceeds. For a property, the purchase cost and allowable expenses can affect that calculation, while reliefs depend on the circumstances. The NRLA's objection is specifically that, apart from certain capital costs being recognised, an increase in the property's cash value is treated as a gain without separating out inflation.

The association connects that tax argument to pressure on rental availability. Rightmove figures cited in the report put average enquiries at 10 for each available rental property, twice the pre-pandemic level. Enquiries are a measure of interest, not completed tenancies or a count of households unable to find a home. The figures sit alongside the affordability concerns covered in reporting on average rents outside London.

The NRLA argues that a shortage of homes to rent can make it harder for younger people in particular to access work and education. Its proposed response focuses on private investment, rather than a direct rent reduction or a housebuilding programme. That distinguishes the call from the wider delivery questions examined in coverage of falling housebuilding output: retaining investment in rented accommodation and increasing the overall housing stock are different policy tasks.

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What people are saying

Ben Beadle, the NRLA's chief executive, argues that the tax system should encourage landlords to provide homes over the long term. He says charging tax on value increases caused by inflation reduces the worth of an investment and its potential return. His case is that the treatment of a future sale can influence whether someone commits money to rental housing in the first place.

Beadle also argues that potential investors may prefer keeping money in a bank rather than taking on the risks and responsibilities of letting property. That is the association's assessment of investment incentives, not evidence that every landlord would make the same choice. Capital gains tax on a disposal is also separate from rental yield, the income measure discussed in reporting on landlord buying patterns and yields.

For the NRLA, recognising inflation would help preserve the purchasing power of money released by a property sale. The association says combining that adjustment with recognition of long-term use could strengthen investor confidence and support rental supply. Its argument concerns the money available after disposal as well as the incentive to hold a property, rather than simply the headline sale price.

The report presents the landlord association's position but contains no response from ministers, tenant organisations or an independent tax specialist. It gives no estimate of the cost to the Exchequer or the number of additional rental homes the proposed relief might support. The claimed benefit for renters therefore remains the NRLA's policy argument, rather than a measured outcome or an agreed government assessment.

What happens next

The next policy decision sought by the NRLA is government acceptance of the principle that inflation should be recognised in the calculation. Nothing in the report establishes that ministers have accepted that request or begun a consultation. For landlords considering a sale, the announcement therefore provides no confirmed new relief on which to base the transaction.

The association has proposed limits on how an inflation adjustment could operate. Relief would not exceed the inflation actually experienced, and it could neither create nor increase an allowable capital loss. According to the NRLA, those safeguards would keep the measure focused on removing inflation from a gain rather than allowing an additional tax loss.

Important details would still be needed to turn the proposal into a usable set of rules. The account does not identify an inflation index or explain how periods when a property was not providing accommodation would be treated. Nor does it say whether any eventual measure would cover existing holdings or only future purchases. Those unanswered points prevent a reliable calculation of savings for a particular owner.

For renters, the proposal offers no immediate change to a tenancy, rent payment or right to remain in a home. The NRLA's intended route to greater choice is through encouraging investment and supporting the supply of properties to let. Whether that would happen, and on what scale, is not established by the figures in the report; there is no quantified forecast of lower rents or additional homes.

Why this matters

For landlords, the NRLA's proposal raises a practical question about how much of a property's eventual gain represents increased purchasing power. For renters, its relevance depends on whether a tax incentive would actually support more homes to let. The report establishes neither a new entitlement nor a likely reduction in rents. Owners weighing up a sale should distinguish the association's request from confirmed tax rules, while tenants have no immediate change to their housing costs or rights from this announcement.