Chancellor Jeremy Hunt at the dispatch box outlined a raft of measures intended to be “underpinned by fairness, with those on the highest incomes and making the highest profits paying a larger share”. He revealed that the Capital Gains Tax Annual Exempt Amount would be more than halved to £6,000 from April 2023, from £12,300 currently, and to £3,000 from April 2024, which along with reducing the dividend allowance is expected to generate more than £1.2 billion a year from April 2025.
However, the capital gains move has prompted fears that many buy-to-let owners already struggling with increased costs will rush to sell their properties, accelerating a drop in house prices, and exacerbating existing challenges in the private rental market.
Jamie Lennox, director at Dimora Mortgages, said: "The cuts to the capital gains allowance threshold could be the final nail in the coffin for small buy-to-let owners. They're already facing rising rates and the reality is that they can't borrow enough on a remortgage to switch lenders. This could lead to a huge sell-off."
Echoing this prediction was Riz Malik, director at mortgage broker R3 Mortgages, who said there could be a “buy-to-let bonfire” in the next 12 months with a flood of properties coming onto the market, while Paresh Raja, chief executive of MFS, with the bespoke specialist lender in fact finding that 40 per cent of landlords now plan to sell one or more of their properties in the next year. He said: “Such an exodus from the market would present an apocalyptic challenge to an extremely competitive private rental sector.”
InvestingReviews.co.uk boss Simon Jones predicted that already-soaring rents is a trend that “looks set to accelerate as more investors exit the sector for less-fuss investing alternatives”. He deemed lowering the capital gains ceiling a “fresh raid” on property wealth and means “landlording is no longer a viable investment strategy for the future – the conversation increasingly among existing landlords is that passive investment platforms like ISAs and [self-invested personal pensions] now provide greater returns with less hassle and fewer taxes than bricks and mortar”
However, despite such strong reaction to the autumn statement from a property perspective, financial and currency markets were more muted in their response. Indeed, Nigel Green, chief executive of finance giant deVere Group, said the Chancellor “has managed to make markets boring again – which is a win for the government… The lack of major volatility of the pound and the bond market, which sets the rate at which the government can borrow money, suggests the Hunt statement has worked in bringing back some much-needed market credibility.”
That being said, one firm to see its share price fluctuate in the wake of Mr Hunt’s statement was Scottish energy giant SSE. Its shares fell to 1,575.43p on confirmation of an expected windfall tax on energy-generators, after opening at 1,671p, closing up 25p at 1,669p. Michael Hewson, chief market analyst at CMC Markets UK, noted that the firm and Scottish Gas owner Centrica were “somewhat counterintuitively” the best-performing shares in the session.