Labour has cast doubt on the Conservatives’ proposal for a two-year temporary capital gains tax break for landlords who sell to their existing tenants  

In its document, Tory Manifesto: The Money’s Not There, Labour points out that the party has costed its policy – which would provide a tax break to landlords worth an average of £21,000 - at £20 million each year for two years.

It adds: “Costing assumes the two-year holiday starts from April 2025 and lasts for two years, using numbers provided by the Conservative party. Costings do not make a dynamic estimate of impact of wider CGT receipts due to behavioural effects, with some experts noting potential for significant distortion.”

The Tories’ CGT policy - which seems particularly unambitious and thin on detail - aims to boost home ownership in the near term.

However, tax experts have expressed concern that some could find a loophole in the policy to avoid paying CGT even when not selling to genuine tenants.

This is because sales of properties with large capital gains could be structured as a short tenancy to the purchaser followed by a sale, then the buyer and seller could agree a lower price, sharing the saving, or a landlord could sell to an existing tenant with an explicit or implicit agreement that the tenant immediately sells it on to a third party.

The scheme would be open to all landlords and tenants across the UK, but investors would only be able to use the exemption if they sell their properties to tenants who were renting from them at the time the day before the announcement – 10th June. It also only applies to individual private landlords and not companies.

Earlier this year, Paul Johnson, director of the Institute for Fiscal Studies, suggested that an easy way to improve the system would be to reduce the stamp duty surcharge (ideally, abolish it), end the restrictions on mortgage relief and reform capital gains tax so that it was charged only on any real increase in value.