Property is a gold mine… for HMRC


Due to changes in taxation, the profitability of the buy-to-let market has tightened. As a result, landlords are offloading their properties in their droves.  According to recent figures from the taxman, capital gains tax receipts are up 18% over the year 2018-19. Last year, HMRC had a record haul of £9.2bn and this year it’s on track to be another record year.

Squeezed landlords

Buy-to-let landlords are getting squeezed by HMRC in two ways. The first is that the higher rate tax relief on mortgage interest is gradually being phased out. The second is that there is an extra 8% capital gains tax on the sale of the property. This makes both holding and selling buy-to-lets less profitable.  Sean McCann, a chartered financial planner at financial advice firm NFU Mutual, said ‘essentially, landlords are being squeezed from two sides by the taxman’.

More pain, less gain

The 18% increase in CGT can be laid at the door of these two tax changes. CGT is a growing revenue source for the government and HMRC, sensing opportunity, is making a further change. At the moment, capital gains tax is collected on 31st January following the end of the tax year in which the sale has been made. There are plans to change that rule so that from April 2020, capital gains tax will have to be paid within 30 days of the sale.

The growing number of properties hitting the market will also depress house prices. The current uncertain environment means it’s already a buyers’ market and house prices are falling, but this might be exacerbated if the market is flooded with properties for sale.

Photo by takaharu SAWA on Unsplash