Property investors looking to sell up before possible Capital Gains Tax rises should look to unconditional auctions, says Auction House.

Rumours are flying that CGT could be raised in the Autumn Budget on October 30, which could significantly impact property investors’ profits. Currently, higher rate taxpayers pay 24% on property gains, but this could potentially be raised in the Budget to align with income tax rates. This would put CGT at 40% or 45% for higher earners.

As CGT is only paid upon the sale of a property, a possible increase will not affect long-term investors who have no immediate plans to sell. 

However, the failure of the government to rule out CGT raises has put other landlords and investors on high alert, particularly as this comes on the back of further announced changes. 

Vows to strengthen the Renters’ Rights Bill, which could abolish no-fault evictions, and announcements that landlords will need to improve their properties’ Environmental Performance Certificate (EPC) ratings, have left both parties feeling unsettled.

“This has created an uneasy atmosphere in the private rental market,” comments Olivia Boulting, Regional Manager and Auctioneer of Auction House South West. 

“There’s been a lot of change in the sector and now we don’t know whether CGT changes will come into force at the end of October or implemented later. As a result of all the uncertainty, we’ve already seen many landlords looking to sell their rental properties.”

There is now little time left for other landlords to sell up and beat the possible rises. “Due to the complexity of the conveyancing process, there’s no way property owners will now be able to get contracts exchanged before the 30th October if they sell via the private market and estate agents,” explains Boulting.

However, this does not mean that landlords looking to exit have missed their moment.

Boulting suggests that unconditional auctions provide security to sellers as the buyer enters a legally binding contract the moment the hammer comes down. At this time, contracts are exchanged, which is the point at which a taxpayer becomes liable for CGT. Completion then takes place in around 28 days, meaning landlords could sell their property before any rises are enforced. 

Another plus for landlords selling up is that nothing needs to be done to the property. 

“Many landlords or investors are actually looking for something they can add value to,” explains Boulting.

There are benefits for buyers too, who can pick up a tenanted investment that earns them an income straightaway while also gaining development opportunities.

To beat the potential CGT rises and auction their property, sellers need to allow around four weeks’ notice. They can then be entered in an auction before the end of October.