Tax breaks should be offered to landlords who sell their rental properties to first-time buyers or key workers, according to Landlord Mortgages.
The mortgage broker says these landlords could be offered either a reduction in the overall amount of tax paid, or an increase in the period in which the tax can be paid.
The suggestion follows data analysis by the firm which showed that UK landlords are facing a capital gains tax (CGT) bill of over £4.1bn – an average of £48,600 each.
Lee Grandin, managing director of Landlord Mortgages, says “huge” house price increases are responsible for the problem, but offers a possible solution.
“House price increases have been a boon for many ordinary homeowners but they also pose a problem for buy-to-let investors," he says.
“If a property shows considerable capital growth, landlords will generally remortgage to release some of the equity in order to expand their property portfolio.
"While this allows them to spread the risk amongst a selection of residential investments, it does mean that if they choose to sell the property, they need to ‘reclaim’ some of this equity to pay their CGT bill.
“Through careful financial management, a significant CGT bill can be reduced but no matter how well you plan these costs cannot be removed altogether.
“With the average landlord facing a CGT bill of £48,600 and the industry as a whole needing to find £4.1bn, something definitely needs to be done.
“The government has plans to significantly increase the UK’s housing stock over the next ten years to accommodate the increased demand for owner occupied homes.
“Therefore, we propose that tax breaks are offered to landlords who sell their rental properties to first-time buyers or key workers.
“The ‘relief’ could come in several forms – either a reduction in the overall amount paid or an increase in the period over which the tax can be paid. There are many possibilities.
“CGT is a huge problem in the buy-to-let sector and we call upon the Government and other interested parties to work together to ease this burden on landlords.”
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