NRLA urges chancellor to tackle ‘farcical’ CGT system

The National Residential Landlords Association (NRLA) is urging the chancellor to tackle the UK’s “farcical” Capital Gains Tax system at next week’s Budget speech.

Making the argument, the NRLA points to current housing shortages in the PRS which have doubled since the pandemic.

New rental supply is being exacerbated by the tax system the NRLA has argued, claiming this discourages investment because it blurs the distinction between genuine gains and price increases resulting from inflation.

Research from the NRLA has found that between 2015 and 2024 just one-fifth of the increase in house prices represented real-terms gains, with the remainder attributable to inflation.

Despite this, all price appreciation — with the exception of certain capital costs — is treated as if it were profit and taxed when a property is sold.

To address this, the NRLA is calling on the chancellor to use his first Budget speech to announce fundamental reforms to CGT.

Here, the NRLA proposes CGT should be made to only apply to “genuine” gains and not gross increases in property values.

Additionally, long-term use should be recognised with relief available that would help distinguish between using property for accommodation and short-term “flipping”.

“It is absurd that investors face CGT on increases in property prices that are simply the result of inflation,” said Ben Beadle, CEO at the NRLA.

“The chancellor has an opportunity to put this right.

“A fairer CGT system that recognises inflation and rewards long-term investment would help rebuild confidence in the sector and support the supply of rental homes.

“If we want renters to have more choice and affordable places to live, we need a tax system that encourages investment rather than undermining it.”