Following the Bank of England’s recent decision to cut interest rates, NAVA Propertymark has warned of the dangers of increasing Capital Gains Tax (CGT) at a time when confidence is returning to the housing market.
From 6th April 2024, former Chancellor Jeremy Hunt cut the higher rate of Capital Gains Tax from 28% to 24%, impacting landlords and second homeowners who decide to sell, while the lower rate would remain at 18% for any profits within the basic tax rate bracket.
The Office for Budget Responsibility (OBR) predicted in its March 2024 Economic and Fiscal Outlook that a cut in CGT payable on residential property gains boosts property transactions by roughly 2%.
Therefore, with the Bank of England cutting interest rates from 5.25% to 5%, this should lead to mortgages becoming more affordable for potential buyers.
However, Chancellor Rachel Reeves is reported to be considering increasing Capital Gains Tax to fill the ‘£22bn black hole’ in Britain’s finances.
NAVA Propertymark warned that such a move could jeopardise growth in the housing sector during a period when it needs it the most.
Richard Worrall of NAVA Propertymark said: “The Bank of England cutting interest rates should help stimulate growth in the housing market, which is fantastic news for those who are hoping to purchase their next home.
“However, if the Chancellor increases the higher rate of Capital Gains Tax, this could reduce the number of property transactions on the market at a time when full confidence needs to be restored to the housing market, especially when encouraging housing growth is a central part of the new UK Government’s mission.”
