SDL Property Auctions offers help to private landlords as CGT changes loom
The property sector has experienced a quiet period in recent months, with many buyers and sellers holding off on transactions ahead of the General Election. Now, with a new Labour Government in place, many are waiting to see what changes may follow.
This anticipation will soon end, as Rachel Reeves is expected to deliver Labour's first budget on Wednesday 30th October. A major concern for private landlords and property investors is the potential rise in Capital Gains Tax (CGT).
Many landlords have already paused plans to expand their property portfolios, and some are considering exiting the market entirely to avoid being impacted by higher tax rates.
Here, Andrew Parker, auctioneer at SDL Property Auctions, explains how property auctions could help landlords thinking of selling their properties before any potential changes to CGT.
Current speculation around CGT
Financial analysts widely expect that CGT could be increased to align with Income Tax rates. Although there’s been no formal announcement yet, the Government has hinted at the need to make "difficult decisions" in this budget and has pledged not to raise taxes on working people. This has led to widespread speculation that a CGT increase is likely.
What is Capital Gains Tax?
CGT applies to the profit gained from the sale of an asset, which means the tax is based on the increase in value between when the property was bought and when it is sold.
Currently, CGT is set at 18% for basic rate tax payers and 24% for higher rate tax payers, whereas Income Tax rates stand at 20%, 40%, or 45%. It’s widely believed that CGT could soon be brought in line with these Income Tax rates.
Impact on the property market
If a large number of private landlords exit the market, we could see supply shortages in the rental sector, potentially driving up rent prices. Fewer available rental properties might also push some landlords to cut maintenance costs, which could negatively affect living conditions for tenants.
However, any changes to CGT are unlikely to take effect immediately. The anticipated timeline suggests that increases may be introduced in the spring, giving landlords and investors time to make informed decisions. This could result in a surge of property sales over the next few months, as sellers rush to complete transactions before any new tax rates are implemented.
Why auctions?
Property auctions offer a fast and reliable route to selling, which is particularly important in this uncertain market. Most auction sales complete within 30 days, while traditional property sales can take 5-6 months to finalise, with around a third of private treaty sales falling through.
At auction, a property can be listed today, and a legally binding sale can be agreed upon in as little as two weeks, with the entire process typically completed within 30 days.
Additionally, landlords don’t need to worry about whether their property is occupied or vacant. Auctions attract a wide range of buyers, including those looking for ready-made rental income, as well as investors, owner-occupiers, and housing associations. Since 2022, more than 12,600 tenanted properties have been auctioned in the UK (according to EIG).
If you're a private landlord exploring your options, the experienced team at SDL Property Auctions is available for a no-obligation discussion. Our auction experts can help you assess your portfolio and the potential sale prices you could achieve through auction.
