Property Expert Warns Prime Minister Burnham Against Landlord Tax Hikes, Citing Market Volatility and Tenant Impact
LONDON – A prominent voice in the UK property sector has issued a stark warning to Prime Minister Andy Burnham regarding potential increases in taxes on landlords, arguing that such measures could destabilize the housing market, exacerbate the ongoing rental crisis, and ultimately harm tenants.
Tom Bill, Head of Residential Research at leading lettings and estate agency Knight Frank, highlighted a worrying shift in political discourse. While the summer months have, fortunately, been devoid of the speculative tax discussions that rattled markets a year ago, a new concern has emerged: the potential alignment of Capital Gains Tax (CGT) and Income Tax rates.
"One possible change appears to be aligning rates of Capital Gains Tax and Income Tax," Bill stated in his recent weekly blog. He cautioned that such a move would not only be "bad news for some landlords" but would also inevitably lead to negative repercussions for tenants. "Tenants would also suffer if owners sold and upwards pressure on rents increased," he explained.
Currently, residential Capital Gains Tax rates stand at 18% and 24%. However, if the proposed alignment were to proceed, these rates could skyrocket to match income tax rates, potentially reaching up to 45%. This drastic increase, if agreed upon in October’s Budget, could trigger a mass exodus of landlords from the sector, particularly those struggling to sell properties in a challenging market. "While many landlords exiting the sector will have sold at the current rates, those with properties on the market and unable to find purchasers – a problem increasingly common for flat sales – risk being caught by such a change if it’s agreed this autumn and enforced with little notice," Bill warned.
The Renters Rights Act, introduced in May, has already demonstrated the "law of unintended consequences," according to Bill. He observed that some landlords have already exited the market, while others have increased asking rents to offset the heightened financial risks associated with the new legislation. Further tax burdens could amplify this trend, ultimately making rental properties less affordable and scarcer.
Beyond the immediate threat of CGT alignment, Bill anticipates that a "smorgasbord of taxes on assets and wealth" is likely to be Prime Minister Burnham’s preferred strategy for funding his policy agenda. This suggests that the High Value Council Tax bands, introduced in last November’s Budget, may merely be "introductory rates," with further increases on the horizon.
Bill elaborated on the political calculus driving these potential tax changes. With the bond market unwilling to tolerate a government spending spree, Labour backbenchers resistant to significant spending cuts, and the Labour manifesto ruling out rises in income tax, VAT, or national insurance, targeting assets and wealth appears to be the "default option" for the Prime Minister.
However, Bill cautioned that this approach comes with significant political risks for a Prime Minister known for being a "people-pleaser." He stated, "He will have to alienate more of the electorate as he makes difficult choices that involve trade-offs and lead to unintended consequences."
The cumulative impact of such measures, particularly if high-value property is targeted for the third successive Budget (following changes to stamp duty in 2024 and council tax bands in 2025), could severely impede the nascent recovery in the prime London market. "It could put a dent the gradual recovery that has been taking place in the prime London market this year," Bill concluded, underscoring the delicate balance required to maintain a stable and affordable housing sector.
