Finance and Taxation Reform Press Releases

Landlord tax relief proposals revealed in Onward report

Sally Walmsley
Written by Sally Walmsley

Landlords could be offered capital gains tax relief to encourage longer tenancies and sales to tenants in private rented housing.

Conservative Think Tank, ‘Onward’ has today revealed proposals for the tax relief to encourage landlords to sell to sitting tenants – and offer longer leases.

It says the government should introduce a 50% capital gains tax exemption, or ‘Landlord Sales Relief’, on existing rental properties that are sold to tenants who have lived in a property for three or more years continuously.

This would, the report argues, encourage landlords to offer long-term tenancies and sell to sitting tenants.

The RLA has long called for tax incentives for landlords in these circumstances, and although today’s proposals are not exactly what the association outlined in its proposals, it has cautiously welcomed the news.

David Smith, Policy Director for the Residential Landlords Association said:  “We welcome Onward’s acceptance of the need for more positive taxation in the rented sector which the RLA has long argued for.

“Indeed, last year, we suggested using Capital Gains Tax reliefs in a similar way to that being proposed today.

“Since then, a report by academics at Cambridge University for the RLA has argued that it is not clear whether a reduction in the rates at which Capital Gains Tax is applied would incentivise landlords to sell their properties to sitting tenants.

“A more suitable approach would be a tax relief on rental income for the provision of longer tenancies with a refund on the stamp duty levy for additional properties where a landlord is prepared to sell a property to a sitting tenant.”

He added: “Where Onward is wrong is in its call for landlords to disinvest from the sector.

“With the demand for private rented homes showing no signs of abating, and the Institute for Fiscal Studies today warning of the difficulties many young people have affording a home of their own, to choke off the supply of rental homes would leave many young people stranded and continuing to rely on the home of mum and dad for a place to live.

“The Chancellor should use his budget to scrap the stamp duty levy on additional properties where landlords are prepared to invest in property adding to the net supply of homes. This could include bringing empty homes back into use, new build properties or converting larger properties into smaller, more affordable units. To tax new housing supply given the current housing crisis we face is simply ludicrous.” 

In addition to the 50% capital gains tax exemption the report proposes HMRC should offer any tenant buying a property in which they have lived continuously for three or more years a ‘Long-Term Tenants Credit’ equivalent to the remaining 50% of capital gains tax relief on that property.

This would, the report suggests, operate as a contribution towards the deposit they require to secure a mortgage on the property.

It continues: “In order to reduce the ability for investors to game the relief, the policy would only apply to properties that are currently rented out.

“This would prevent landlords from simply flipping additional properties or investors buying additional properties to benefit from this tax relief in three years’ time.

“To further encourage longer tenancies and landlord divestment, the Government could consider extending the relief to any landlords selling to long-term tenants of any property, not merely those currently resident in the landlords property. This would extend the scope of the policy”

Onward suggests that under its proposals:

  • In England, an average landlord selling under the scheme could expect to benefit from Landlord Sales Relief worth an estimated £7,500. This rises to £19,500 in London.
  • The average tenant would set to benefit by up to £7,500 towards their deposit for a mortgage, providing significant help towards their first home. This rises to £19,500 in London.

The report estimates  some 1.9 million households would be eligible for these new reliefs, with around 88,000 households benefiting each year, based on current rates of churn and expected take-up.

To read the report in full click here.

To read the RLA’S budget proposals click here.

About the author

Sally Walmsley

Sally Walmsley

Sally Walmsley is the Magazine and Digital Editor for the NRLA. With 20 years’ experience writing for regional and national newspapers and magazines she is responsible for editing our members' magazine 'Property', producing our articles for our news site, the weekly and monthly bulletins and editorial content for our media partners.

1 Comment

  • I own and rent a small, one-bedroom flat in Central London. I have let it for the past 15 years, and whilst I have had two tenants who stayed for 3-4 years, the others were only looking for short-term tenancies. I don’t know where ‘Onward’ derive their research from, but a small flat of this sort, of which there are plenty in central London, is seen as a stepping stone, in my experience, to a larger property.

    On the matter of CGT, I would willingly sell my flat tomorrow if it were not for the amount of tax I owe on it on account of the price I paid for it many years ago on the Council Right-To-Buy scheme and what it is now worth. I am 58, have no pension and live largely on the income from my flat in a much cheaper part of the country, and have to consider how the money I would have left from the sale would last me for the next 20-30 years. There must be others in a similar position. The flat is my pension, in effect, but every year I keep it it’s reducing in value and costing more and more to upkeep. Why doesn’t the Government consider allowing CGT relief on one rental property for people without pensions or other assets. I think this would free up a good few properties.

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