Research from Quilter shows that the average landlord would be £11,000 worse off if the Chancellor chooses to increase capital gains tax rates in line with income tax rates.
Rachel Reeves is believed to be considering the move as part of her first Budget on October 30, in a bid to balance the books and plug a £22 billion “black hole” in the public finances.
According to figures from HM Revenue & Customs, capital gains tax revenues reached £14.4 billion in 2022-23, even before any rate hike.
Most homeowners benefit from the private residence exemption, which means they are exempt from paying taxes on the sale of their main home.
But landlords and sellers of second homes are liable to pay CGT on any profits.
Basic rate taxpayers currently pay 18% CGT, while higher rate taxpayers must pay 24%.
However, if the rates were brought into line with income tax, a basic rate taxpayer would pay 20% CGT and a higher rate taxpayer would pay 40%.
Using Zoopla data on the average profit from property sales in , Quilter looked at the potential CGT increases for landlords.
Quilter found that a higher rate taxpayer would pay an average of £28,400 in CGT if the rate were increased to 40% in line with income tax.
That equates to an increase of £11,360 on what they would pay at the current rate of 24% CGT.
A basic rate taxpayer would pay £14,200 on an average UK property gain if rates rise as predicted, adding £1,420 to what he would pay under current rates.
Shaun Moore, tax and financial planning expert at Quilter, said: “During Labour’s election campaign, the party remained tight-lipped about its plans for CGT.
“While senior Labor figures were outspoken in their belief that the party would not increase national insurance or income tax, no one was willing to be inspired by what the party could do with other taxes, such as the CGT.
“If plans such as aligning CGT with income tax rates come to fruition, we could see significant impacts in the short and long term.
“Unless anti-forestalling measures are announced in any plans, we could see a rise in property sales as homeowners rush to sell their second properties before new legislation comes into force.
“This could temporarily boost housing market activity, and many people will reconsider their property portfolios, potentially shifting their investments to other assets with more favorable tax treatments.
“However, the truth is that nothing has been announced at this stage and unless the sale of a second home or a buy to let is already part of your plan, it is not wise to make decisions based on what might happen .”