Proposals to increase Capital Gains Tax (CGT) would freeze the rental housing market making it less responsive to tenant demand, the National Residential Landlords Association (NRLA) has warned.

With the Office for Tax Simplification proposing measures to equalise CGT with income tax rates, the NRLA highlighted research which found that 72% of private landlords said the tax was a “major disincentive” to sell property on the open market.

Increasing the tax would serve to freeze the market making it far less responsive to changing needs from renters, the NRLA stated. With almost half of landlords having entered the market to contribute to their pension, the analysis also suggested that increasing CGT would negatively impact their retirement planning.

Rather than developing more “punitive tax hikes” on the rental market, as the NRLA described, the Association has called on the Chancellor to use the tax “more smartly” in the forthcoming March Budget.

The Association is recommending that to support the government’s ambitions for homeownership, there should be a CGT exemption or reduction where landlords sell properties to sitting tenants.

NRLA chief executive, Ben Beadle, commented: “Increasing CGT would reduce churn in the rental market undermining the flexibility it has always been good at providing. 

“A tax hike would be a kick in the teeth for all those who have invested in property to provide security for the future for themselves and their families. 

“The Chancellor needs to end the war on the rental market and recognise the importance of a healthy and vibrant rented housing sector. Tax should be used more smartly, not as a blunt attack on the market.”

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