Jamie Fraser, 56, has been a landlord for 27 years but has recently started selling off his portfolio of properties, ahead of the changes that the Labour Party is likely to bring in at the end of this month.
“In July, we knew that capital gains tax (CGT) was going to change. Labour had drilled down so much on not increasing income tax, VAT or national insurance, it was so obvious that they were leaving CGT off the list.”
CGT is a tax levied on the profit you make when you dispose of an asset, such as shares, artwork or a property you do not live in. The first £3,000 of profit is exempt, but, after this, CGT is charged. For property, the CGT rate is currently 18 per cent for basic rate taxpayers and 24 per cent for higher rate earners.
However, it is widely expected that Chancellor Rachel Reeves will raise this in the Budget on 30 October to plug a “£22bn black hole” in the public finances.
Mr Fraser, who used to have 21 properties in his name and three in a limited company, has sold three properties this year already and is rushing to get a fourth, a three-bedroom house in Stevenage, sold before the Budget.
He told i: “I will need to pay £47,000 in CGT now but, if I leave it till after the Budget, it will almost double to £90,000.”
This is if, as expected, Labour increases the rate of CGT for top-rate earners to 45 per cent, in line with income tax rates.
“I marketed [the property] at £275,000 and it went for £270,000. It should have been £290,000 to £300,000, but I wanted to get rid of it quickly because of the CGT. It sold in a week, and we had multiple viewings and two offers.”
The house is being bought by two brothers who plan to live there and do it up over time. The previous tenant left the property in “a dreadful condition”, after building up £21,000 in rent arrears over seven years, and Mr Fraser had to go to court to get her to leave.
He bought the house 19 years ago for £127,000, and the offer he has accepted means he has made a profit of £143,000 before tax. He feels he is being treated unfairly and doesn’t believe that CGT and income tax are equivalent.
“If people think CGT should be the same as income tax, they misunderstand it. It’s a risk investment and the money you put into the investment has already been taxed as income tax.”
No one knows if Labour will make the CGT changes enforceable immediately, in October, or wait till the new tax year begins in April. However, it may be they wish to put the changes into effect straight away to avoid more landlords selling up immediately.
Mr Fraser added: “If they make it April, I have one or two other properties earmarked to sell and I’ve already spoken to the tenants about the possibility that I might need to. I would rather keep them and keep people in their homes.”
Previously, Mr Fraser took the Conservative government to court over Section 24, which limits how much landlords can offset financial costs, including mortgage interest, against tax.
He argues that, with all these measures, it is the tenants that lose out in the long term.
“Labour wants to exceed the Tories and then wonder why rents are high and everyone’s homeless. [Their] stance towards landlords is not remotely fair, not in any way or interpretation… There’s no end to their keenness on taxation and the public don’t get it, even after 10 years – the tenants get hurt in the end because they have nowhere to rent.
“I love houses, and I genuinely care about my tenants and get on with them. All my tenants are north of 10 years and that was because, historically, their rents are below the market value. Since the tax changes, it’s impossible and I can’t make the numbers work.”
Mr Fraser says the changes in taxation and regulation have started to affect him, day to day. “The stress it puts you under. Everyone thinks that landlords are fat cats but it’s a daily stress… I’m thinking, ‘Do I need this level of stress and fear?’”
He does not have a pension, and his plan had been to be a landlord forever, but the political and financial landscape have now changed.
“It’s all very well raising tax for public services, but you are also stopping the ability of people to expand or pay for their retirement… I’ll probably sell all the properties down till I have nothing.”
The Stevenage house is due to exchange imminently and Mr Fraser is confident that it will complete before the Budget on 30 October.
