Official figures out today revealing a huge increase in capital gains tax paid on residential property sales can be explained by more landlords than usual selling rental homes, it has been claimed.

Wealth management company Quilter says the HMRC figures, which reveal a 15% jump in both capital gains tax paid on property value gains and a 20% increase in the number of taxpayers becoming liable for the tax.

Some 139,000 taxpayers reporting 151,000 disposals of residential property in the 2022/23 tax year amassing a total liability of £1.8 billion, which is much larger than in the 2020/21 tax year.

Quilter says this this data strongly suggests that there is an ongoing exodus of landlords from the property market as the tightening of tax laws on buy-to-lets make them a less attractive investment.

“Coupled with this the continuing high property values but simultaneous threat of a property price crash is seemingly making more landlords opt to sell up,” says Rachael Griffin (main picture), tax and financial planning expert at Quilter.

“How this ultimately impacts the market for all prospective buyers and renters is yet to be seen.

“Currently house prices are slipping slowly but rent remains sky high as renters compete for a dwindling stock of rental properties.”

capital gains

Quilter’s interpretation of the figures is likely to be right – CGT is only payable on second/holiday homes and BTL properties and not paid on ‘primary home’ capital gains..

Griffins says the tax take from CGT is likely to increase given the changes to the Annual Exemption Allowance (AEA) for capital gains tax.

“From £12,300 in the 2022/23 tax year, the AEA reduced dramatically to £6,000 in April 2023 and will further drop to £3,000 from April 2024,” she adds.

“This reduction could significantly boost the CGT take in future years, as taxpayers will have a lower threshold before becoming liable for CGT.”

Read the official stats in full.