Tax rises set to hit landlords in next month’s Budget could push the rental sector crisis “beyond repair”, according to a survey from Octane Capital. 

Tax experts speculate that the capital gains levy may be increased in Chancellor Rachel Reeves’ 30 October Budget, as she bids to raise a range of taxes to plug a £22bn black hole in the public finances.

There is currently a £3,000 tax-free allowance on capital gains, after which there is an 18% capital gains tax applied on residential property sales for basic rate taxpayers and 24% for those in the higher rate tax band. 

The Treasury has reportedly drawn up plans to align capital gains rates with income tax.  

There are also fears that tax on rental income may also rise in next month’s fiscal statement.

Octane’s survey of landlords found that 66% of them have already reduced the size of their investment portfolio in the last year, with “reduced profitability due to previous legislative changes cited as the primary reason for these reductions”.

The proposed ban on ‘no-fault’ evictions in the government Renters’ Rights Bill introduced in parliament today, was also cited as a reason to leave the sector, along with the “inevitable increase in age”, as many landlords who invested in the 1990s approach retirement.

The survey found 52% of buy-to-let owners said they feel less confident under the new Labour government about the state of the rental market.

It found that 75% are concerned that the current government may equalise capital gains tax in line with current income tax thresholds next month.

The study says if this change occurs, 58% would reduce the size of their BTL portfolios as a direct result.

Also, 30% of landlords said they plan to reduce their portfolio size in any case, with a reduction in profitability again cited as the driving factor.

Octane chief executive Jonathan Samuels says: “It seems that our new Labour government is picking up where its predecessors left off within the rental market landscape, driving legislative changes designed to deter landlords from the sector.

“It’s quite worrying to see that such a large proportion have reduced their portfolio size over the last year, with more planning to do so should the proposed changes to capital gains tax come to fruition.

“A tenant-first approach is all well and good but the key factor driving the current rental crisis is the lack of available stock and by further penalising landlords, Labour are set to push the current crisis to breaking point.”

Octane’s study was carried out on consumer research platform Find Out, which surveyed 1,113 landlords on 6 September.