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Scrap capital gains tax for sales to tenants, government told
The government has been urged to scrap capital gains tax for buy-to-let landlords who sell their homes to their existing tenants.
The radical policy has been proposed ahead of this month’s budget by right-wing thinktank Onward, which claimed that it could help 88,000 households a year buy their first homes.
In a paper co-authored by former Downing Street policy advisor Will Tanner, the thinktank proposed that the relief from capital gains tax should be split evenly between landlord and tenant in order to incentivise sales to private renters.
Capital gains tax is set at 28% on second homes for higher-rate taxpayers, meaning relief would net an average of £15,000 per home. In London, this would rise to £39,000, meaning tenants in the capital could receive £19,500 towards a deposit.
Chancellor Philip Hammond is said to be considering including the tax break in his budget later this month, according to a report carried in a number of national newspapers today.
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The windfall would be funded by tightening other tax breaks currently offered to buy-to-let investors, such as lettings relief, which can net landlords up to £40,000.
Onward said the offer should be made available to any private landlord with a sitting tenant who has lived in the property for at least three years. The thinktank said the government could further encourage longer-term tenancies by offering landlords a ‘wear and tear’ allowance if they offered tenancy agreements of at least three years.
The report said: “These proposals would reward landlords who offer long-term tenancies and give today’s generation of private renters an opportunity for ownership, just as Right to Buy did for a previous generation of council tenants.”
The suggestion has emerged as a separate report from the Institute for Fiscal Studies (IFS) revealed the scale of the housing affordability crisis for young people.
The IFS found that just 35% of 25 to 34-year-olds in the UK were homeowners in 2017, down from 55% in 1997. Over the same period, property prices in England rose 173% in real terms, with that figure rising to 253% in London.
More than three-quarters (78%) of young people would now need to spend at least six months’ income to afford a 10% deposit on an averagely priced house in their local area, according to the IFS research.
