A Capital Gains Tax rate change could be the final nail in the PRS coffin as investors ditch bricks and mortar, according to one big financial analyst.

Rumours that the government will hike CGT and might potentially align rates with income tax have been causing alarm for buy-to-let landlords and those with second homes, particularly higher earners who could potentially be looking at a CGT rate of 40% or even 45% when they sell up.

That’s a huge increase on the current level of 24%, a move that could potentially leave property investors thousands of pounds out of pocket, says Alice Haine (main image) at Bestinvest by Evelyn Partners.

“If Chancellor Rachel Reeves does push ahead with a dramatic shift in CGT rates, a selling frenzy could ensue if homeowners rush to sell before any new rules come into force,” says Haine.

“There is also the very real risk that a new CGT regime takes effect immediately, a scenario seen in the past under previous administrations and a move that would prevent a flood of new listings.”

Sharpest rise

Her comments come as Halifax reports that house prices jumped by 4.3% in the 12 months to August compared with July’s 2.3% uplift - the sharpest rise since November 2022 – ahead of the next interest rate decision later this month.

Haine says those trying to sell now to get ahead of any CGT changes may have run out of time to get a deal across the line as the Budget is less than eight weeks away.  

"Any increase in rates, whether immediate or set for a later date, has the potential to dampen property prices,” she adds.

“Higher mortgage rates, a significantly tighter regulatory environment and a raft of unfavourable tax changes in recent years have already encouraged many buy-to-let landlords and second homeowners to sell up. A CGT rate change could be the final nail in the coffin for the sector.”