Buy-to-let investors: 'Let us off capital gains tax and we'll sell to first-time buyers'
Britain's biggest landlord trade body is urging the Government to waive capital gains tax where properties are sold to first-time buyers
Making his point: David Cameron speaking at this year's Conservative Party conference
'Generation buy': David Cameron has prioritised home ownership Photo: GETTY
Britain's biggest representative body for buy-to-let investors has proposed that investors should be given tax relief on the gains they make when selling their rental properties - in return for selling the properties to first-time buyers.
The proposal, made to chime with the Government's initiatives to increase home ownership, is likely to prove highly controversial.
That's because capital gains tax is one of the biggest tax hits on the buy-to-let sector, reaping billions for the Exchequer.
Because the buy-to-let industry has grown so fast, much of the capital gains tax laibility - running into tens of billions of pounds - is as yet uncrystallised.
The Residential Landlords Association, which represents around 40,000 private landlords, has suggested the Government could "encourage" landlords to sell their properties to tenants and first-timer buyers via tax incentives.
A survey of more than 1,500 investors found two in three would be "more likely to sell" if their capital gains tax liability was reduced.
If the liability was removed altogether, 77pc would consider selling.
Alan Ward, chairman of the trade body, said many long-term investors "need a way out of the market".
“Selling to first time buyers or sitting tenants would be attractive to more than three quarters of landlords given the right tax environment.
“David Cameron’s speech lacks detail as to how landlords could be encouraged to sell and tenants to buy.”
Such a tax perk would clearly benefit those landlords who wish to sell to retire or for other purposes.
It would come at a particularly helpful time for those who will be hit by the new landlord tax announced by George OSborne in his Summer Budget.
This increased tax, applying from 2017 and fully implemented by 2020, will strip away private investors' ability to offset mortgage costs from their rental income before arriving at a taxable.
Mr Osborne's proposed tax change would mean some mortgaged landlords will be paying tax on a loss.
How much capital gains tax do buy-to-let investors pay?
Currently gains made upon selling investment properties are taxed at a rate of 28pc for higher-rate taxpayers.
A buy-to-let investor who bought a £250,000 property in Greater London in 2005 would now sell it for an average £475,000 (according to Nationwide Building Society's house price data).
That would trigger a £225,000 gain and a resulting tax bill for higher-rate taxpayers of £63,000.
Landlords' options to legitimately reduce this capital gains tax liability have been chipped away during successive changes in legislation. There are now very limited means to avoid the tax, accountants warn.
They say that middle-class buy-to-let investors, who have one or two let properties in addition to their home, will typically be hit either with capital gains tax, on the sale of their investment properties; or inheritance tax, if they do not dispose of them before death.