Landlords could face a hike in Capital Gains Tax (CGT) if the economy dips before the Autumn Budget, the Institute of Fiscal Studies (IFS) has warned.

Chancellor Rachel Reeves did not increase the tax in her Spring Statement, but IFS director Paul Johnson says despite the cuts to fund higher defence spending and the changes to working-age benefits, Reeves will need to “come back for more” as there is a good chance that economic and fiscal forecasts will deteriorate significantly.

Johnson claimed this will likely mean raising taxes even further. “That risks months of speculation over what those tax rises might be - a raid on pensions, a wealth tax on the richest, another hike to capital gains tax?” he asks. “With no sense of a tax strategy, we have no idea which way the Chancellor might turn.”

Reeves increased CGT rates in her maiden Budget from 10% to 18% for basic-rate taxpayers, and from 20% to 24% for higher-rate taxpayers.

Forecast downgrade

Following Wednesday’s Spring Statement, the Office for Budget Responsibility downgraded its forecast for CGT intake for every year for the next five years, wiping £23billion off the projected tax intake by 2030.

Charlene Young, of AJ Bell, said: “This indicates that the Government has underestimated the behavioural impact of tax hikes in the October Budget.

“Higher rates of capital gains tax might deter people from investing in growth assets in the first place, potentially depriving them of higher long-term returns, while at the same time undermining demand for the UK stock market.

“Likewise, we’ve seen that people will realise gains before an expected tax hike in order to avoid paying higher rates of tax. It’s equally possible some taxpayers will simply decide to sit on assets for longer, hoping to wait out today’s higher tax rates and realise gains on assets under a more accommodating tax environment in the future.”