Increase may hit rental properties

Increasing capital gains tax could deter investors from putting money into the private rented sector.

The Royal Institution of Chartered Surveyors has today called on the Government to introduce some form of taper relief in tomorrow's Budget to protect long-term investors from the full impact of any rate hike.

Chancellor George Osborne is widely expected to announce plans to raise capital gains tax from its current level of 18 per cent to 40 per cent or even 50 per cent, depending on the rate at which individuals pay income tax.

But RICS said research had found that 72 per cent of its members thought such an increase would deter people from investing in rental property, rising to 100 per cent in the West Midlands.

An RICS economist said: "Our research indicates that an increase in the rate of CGT is likely to deter new investors from entering the buy-to-let market, at a time of acute shortage of affordable accommodation.

"And while it is unlikely that there will be a near term glut of supply, a 'fire sale' of properties by landlords looking to avoid a higher rate of CGT could if it were to materialise have a significant impact on the fragile improvement in sentiment in the residential sector."