The average landlord looking to offload their portfolio from 6 April stands to save 4% on the rate of capital gains tax (CGT) owed, the latest research by Zero Deposit has revealed.
With the average landlord spending just under 10 years within the buy-to-let sector before exiting, Zero Deposit analysed house price growth over the last decade to see how much they stand to be charged CGT on, as well as the difference in this exit fee between the current rate of 28% and the new reduced rate of 24% from 6th April 2024.
While last week’s budget was another lacklustre affair for the property market, the one small rabbit out of the hat was a reduction in CGT from the current threshold of 28% to 24%.
The research by Zero Deposit shows that, across the UK, the average house price has increased by a hefty 65% in the last 10 years, a jump of £111,693.
At the current rate of 28%, this means the average landlord stands to pay a hefty £31,274 in CGT. However, should they wait until next month, selling up will see them save £4,468 per property, with the new rate of CGT costing them £26,806 per property at a charge of 24%.
But while it’s a hefty sum to pay out on an asset you invested in fair and square a decade ago, the average UK landlord looking to exit the sector come April will still have made a respectable £84,886 in capital appreciation per property over the last 10 years.
Buy-to-let investors in London predictably stand to both pay the most and make the most.
The average Landlord is set to pay £45,806 in capital gains tax per property under the new 24% rate, a saving of £7,634 in capital gains tax, with the average property still returning £145,052 in capital appreciation after the government takes its slice.
In the South East, CGT changes will save the average landlord £6,206 per property, with the East of England home to the third largest reduction at £5,928.
In the North East, the average home has increased in value by just £41,449 over the last decade, the lowest rate of capital appreciation of all regions.
This means that the average landlord stands to save just £1,658 in capital gains tax as a result of the Spring Budget cut, but once paid, they will still take home £31,501 in capital appreciation per property.
Sam Reynolds, CEO of Zero Deposit, said: “Another strange budget for the property market and one where the biggest surprise was a cut to capital gains tax, bizarrely positioned by the government as a bone thrown to landlords to incentivise investment into the buy-to-let sector.
“Having hit landlords with a string of legislative changes designed to reduce profitability in recent years, they’ve now made the idea of exiting more attractive, which to most, understandably seems like a backwards approach.
“And while a 4% cut to capital gains tax may seem generous on the face of it, for the average landlord it equates to a reduction of just £4,500 per property, while the Government still collects a hefty £27,000 on their hard-earned nest egg.”
