The National Residential Landlords Association has highlighted a key issue in how capital gains tax (CGT) is calculated on residential property sales. Their analysis shows that between 2015 and 2024, only about 20 per cent of the increase in house prices represents a real gain after adjusting for inflation. The remaining 80 per cent merely reflects the rising cost of living, which currently pushes nominal property values higher without delivering equivalent wealth growth.
For investors, this means CGT liabilities are often calculated on inflated nominal gains rather than genuine profit. This can significantly erode returns, especially in an environment where inflation has been elevated. The NRLA’s call to index CGT calculations to inflation would better align tax payments with actual economic gains, reducing the risk of over-taxation on property disposals.
From a data perspective, this reform could encourage more active portfolio management by landlords who might otherwise hold properties longer to avoid punitive tax bills. It would also bring property taxation closer in line with other asset classes where inflation adjustment is more common. However, any change would need careful calibration to balance government revenue needs with investor fairness.
For UK property investors, the NRLA’s proposal is worth monitoring. If implemented, it could improve after-tax returns and influence buy-to-let strategies, particularly in markets where price growth is closely tied to inflation rather than fundamental demand shifts.
Source: https://www.property118.com/nrla-urges-capital-gains-tax-reform/
