Capital gains tax revenue of £1.8bn from property sales point towards an “exodus of landlords” from the private rented sector due to tightening regulations, Quilter says.

The levy on home sales was applied to 139,000 taxpayers on 151,000 disposals of residential property in the tax year to 2023 raising £1.8bn, according to HMRC figures today.  

The tax body says: “These figures are similar to the figures from the 2021 to 2022 tax year, which in turn showed a 56% and 60% increase in the number of disposals and total liability from the 2020 to 2021 tax year.”  

Quilter tax and financial planning expert Rachael Griffin says these figures point to a flight of landlords from the market, that will lead to lower supply if not replaced, which will push up rents for tenants.  

Griffin says: “This data suggests that there is an exodus of landlords from the property market as the tightening of tax laws on buy-to-let’s make them a more unattractive investment.   

“Coupled with this, the continuing high property values and the simultaneous threat of a property price crash is seemingly making more landlords opt to sell up.   

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

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

Earlier this week, average house prices fell 3.8% to £260,828 in July, the biggest fall in 14 years, according to the latest Nationwide House Price Index.  

Also this week, the average cost of rent in England jumped 19% to hit a record £1,367 per property in July compared to the previous month, data from Goodlord showed.   

Tennant costs are being driven by the summer surge in student lets, rising interest rates and a lack of stock, which has led to “unprecedented upward pressure on prices,” said the letting agent’s monthly rental index.    

This comes as the country’s two million landlords have seen a raft of tax exemptions stripped from them and replaced with tighter regulations over much of the past decade.  

Significant changes for landlords came with Section 24 legislation, introduced in the 2015 Finance Act, which each year made an additional quarter of landlords’ finance costs non-deductible between 2017 and 2021.  

An additional 3% stamp duty surcharge was introduced in 2016, when then-chancellor George Osborne sought to cap landlords’ share of home sales, then running at around 20%, in favour of owner-occupiers.  

A range of other legislation has been introduced in the past decade, from a ban on letting agents charging fees to tenants, to keeping the capital gains tax rate for residential property above the rate for other assets.   

The result was higher costs for landlords, which were passed on to tenants as rent, say many in the sector.  

Overall, the Treasury enjoyed “a bumper year” from capital gains tax revenues, Griffin points out.  

In the tax year to 2023, £16.7bn was owed in capital gains tax by 394,000 taxpayers, realising £92.4bn of gains, a 15% increase in both capital gains tax and gains from the previous year, while the number of taxpayers lifted by 20%, according to HMRC data.