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Meet the small business owners, people and sectors set to be hit hardest by a CGT hike

ended 29. August 2024

Ahead of a possible increase in capital gains and inheritance tax by Keir Starmer’s Labour government, Newspage asked experts from all sectors for their views on who and what could be hit the hardest. They range from smaller business owners and landlords to the stockmarket and property market. 

For example, Gabriel McKeown, Head of Macroeconomics at Sad Rabbit Investments, said: "The potential tax hike could profoundly impact both the property and stock markets, with the fear of increased CGT driving landlords to sell their properties prematurely. In the stock market, the anticipation of higher capital gains taxes will likely lead to increased volatility as investors rush to sell off profitable shares to lock in current tax rates.

Meanwhile, Steven Mather, a Lawyer at Steven Mather Solicitor, warned: "Since Labour got into power, every single enquiry about a business sale or purchase has stressed the importance of completing the transaction before the Budget on 30th October. Many business owners have said that if they cannot complete before then, the deal will be off if CGT changes or there are changes to Business Asset Disposal Relief (previously known as Entrepreneurs Relief). Clients selling for circa £1m or less are the ones particularly affected. They've spent a lifetime building a business, paying all the taxes, to find out that they may be taxed even more on sale when seeking retirement."

Aman Verjee, General Partner at Practical VC, said simply: "If the UK wants to attract talented entrepreneurs, it has to have a competitive tax code. In the US and Canada carried interest is taxed at less than 20%; in France, Germany, Italy and Spain it's 25-30%. In countries like Singapore, UAE, and Switzerland, it's zero. If the UK went far above international norms, we would simply stop hiring and investing in the UK. Taxes paid on capital gains and dividends constitute a double layer of taxation. By adding another layer of taxation at 45% on what’s left for shareholders, the returns to investors would be severely reduced, and that makes it a lot harder to invest in the kind of risky venture-backed innovation that has created all of the growth in our economy over the last 30 years. If taxes on "carried interest" (which is really the incentive-based pay for managers) are increased, managers get a lot less upside from "getting it right" and would probably shy away from risky, high-return opportunities. Amazon, PayPal, Google, Meta, AirBNB, Uber, Netflix and dozens of other companies were created with this kind of high-risk capital. Managers playing for less upside will just "play it safe" and protect their downside, which makes it a lot tougher to build the next generation of corporate leaders."

The views of 12 experts are below.

12 responses from the Newspage community

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Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
For investors, the only thing more certain than uncertainty is the fear of a tax hike, and a seismic shift could be on the horizon. We are already witnessing the tremors of the looming tax threat, with uncertainty prompting many middle-class savers and landlords to reconsider their asset portfolios. The potential tax hike could profoundly impact both the property and stock markets, with the fear of an increase in capital gains tax driving landlords to sell their properties prematurely. In the stock market, the anticipation of a higher CGT will likely lead to increased volatility as investors rush to sell off profitable shares to lock in current tax rates. The government must weigh the trade-offs between immediate fiscal needs and long-term economic vitality, as a tax hike today could be a growth gamble tomorrow. These early reactions are reminiscent of past policies as selling assets now might feel like jumping ship, but some see it as securing a lifeboat before the storm.
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Steven Mather
Lawyer & Director at Steven Mather Solicitor
Since Labour got into power, every single enquiry about a business sale or purchase has stressed the importance of completing the transaction before the Budget on 30th October. Many business owners have said that if they cannot complete before then, the deal will be off if CGT changes or there are changes to Business Asset Disposal Relief (previously known as Entrepreneurs Relief). Clients selling for circa £1m or less are the ones particularly affected. They've spent a lifetime building a business, paying all the taxes, to find out that they may be taxed even more on sale when seeking retirement.
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Ben Perks
Managing Director at Orchard Financial Advisers
Landlords are getting hit from all angles and an increase from CGT will be the final nail in the coffin for many. But an increase in CGT could see people reluctantly keeping hold of property for longer at a time when the Government want to see more property available to residential buyers. This could therefore be a double-edged sword.
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Justin Moy
Managing Director at EHF Mortgages
It's evident that landlords in particular are reading the potential impact of increased CGT. We have four buy-to-let remortgages that have been cancelled as the landlord has decided to sell purely due to this threat. We also help let a few properties and prospective tenants are having to move as landlords have served Section 21s on their current homes. One 3-bedroom property we manage in Braintree had in excess of 50 enquiries in just one day. The vast majority made mention of their landlord selling, hence their need to move.
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Chris Barry
Director at Thomas Legal
Property investors seem convinced a CGT rise is coming and this has prompted some owners to sell earlier than they may have wanted to. However, the more pressing issue is that property investors over the past two years have experienced higher borrowing costs and have had less ability to be able to offset expenses, meaning highly leveraged residential property is now unlikely to be viable. We have seen many more investors selling because they are struggling to evidence a return on investment rather than the nervousness around a future tax increase. The property market seems unaffected by the wave in supply probably due to the company sales of distressed assets to larger investors who have the ability to purchase in cash, therefore, the stock rarely makes the open retail market. With borrowing rates coming down and demand increasing, we see property prices holding strong and even increasing over the coming years.
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Harps Garcha
Director at Brooklyns Financial
Another nail in the coffin for landlords, particularly those who became landlords by accident rather than choice, who are facing an increasingly tough landscape. The combination of rising costs, stricter regulations, and the looming threat of an increase in Capital Gains Tax (CGT) is pushing many to the brink, prompting some to consider selling before the new rules take effect. This is the last thing the rental market needs right now as recent statistics have shown there has been a reduction of 25% in rental properties since 2019.
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Simon Bridgland
Director at Charwin Private Clients
The widest rivers which flood, started off as a trickle upstream, which is exactly what I can see at the moment. Within the last week I have personally had conversations with 5 landlords, all of which are looking to sell off some of their property. They intend to make use of the current CGT regime whilst they can before any likely changes take effect. Some though are hoping to see it through as they feel that the current leaders in Westminster will have a short tenure. Some of our clients are starting to also gift money to loved ones during their lifetimes, the thought of an extra pocket to fill with HMRC isn’t going down well at all and so some are doing all they can to preserve the money they and their loved one have earned.
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Michelle Lawson
Director at Lawson Financial
People and consumers are feeling battered and down-trodden over years of hardship. The Government seem determined to pillage the pockets of hard-working individuals just trying to make a living. Some of those happen to be landlords, intentionally or accidentally, who are now seriously reconsidering their options. All of this will have the consequences of hurting the people it is set to protect. It is getting to the point where it is just not worth owning anything as the Government is on a tax rampage to refill their own coffers after their own financial mismanagament and failings at the expense of those that have worked hard, saved and budgeted well. As well as an exodus of landlords continuing, this may very well push more to seek residence overseas away from this constant chaotic hamster wheel circus.
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Rohit Kohli
Director at The Mortgage Stop
After Labour secured victory their tone changed almost immediately and Starmer's message yesterday that "things can only get worse" is very different from the Tony Blair days. We have been speaking to landlords in particular who are convinced that they are going to be targeted by the budget, in particular by CGT changes on 30th October and are looking to exit as early as possible. It's already having an impact, we've seen some landlords cancel planned purchases and worst of all we have had conversations with some tenants who find that their landlords are selling and they want to buy their own home but either don't have the deposit or simply don't meet the lender's affordability. For example, one couple we spoke to is being turfed out of their home in a couple of months as the landlord is selling, they can't afford the mortgage to buy their home, yet they will see their rent increase from £900 to almost £1500 if they rent another property.
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Anita Wright
Independent Financial Adviser at Ribble Wealth Management
The rumour mill has been hard at work this last few weeks predicting what tax rises might be heading our way. Equalisation of capital gains tax rates with income tax rate – this is the most plausible change; indeed, I’d be surprised if this didn’t happen. Higher and top rate taxpayers will have to pay capital gains tax at 40% and 45% and not the current rates of 20% or 24% for second property sales. So as not to discourage business owners from investing in and expanding their businesses, there may be a sweetener in the form of an increase in the level of Business Asset Disposal Relief from the current level of £1,000,000. However, there is also a rumour circling about a cut to the current threshold.
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Dariusz Karpowicz
Director at Albion Financial Advice
The topic of potential increases in capital gains and inheritance taxes is definitely sparking concern among landlords across the UK. Many are not taking chances and are looking to sell now to avoid a higher tax bill later. There's a sense of uncertainty in the air, with some waiting to see if these changes actually come to pass, but the overall mood isn't great. Labour's proposed policies seem to be making landlords' lives more difficult, and it's especially hitting smaller landlords hard. We're seeing some exit the market altogether to avoid the looming tax hike.
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Patricia McGirr
Founder at Repossession Rescue Network
At a time when we need people to be more self-sufficient, we’re punishing those who’ve done just that. It's a kick in the teeth. The talk of Labour’s tax hikes is sparking panic among hardworking people who’ve spent years building up their savings and investments. We’re seeing a surge in homeowers and investors desperate to sell off properties, before the government raids what they’ve worked so hard to achieve.

This rush could flood the market, driving down property prices and shaking up the stock market.

If these tax changes go through, it won’t just reshape the financial landscape, it’ll send a harsh message to anyone trying to secure their future. Whilst it might also create a land of opportunity for those able to take advantage of panic selling, it could destabilise recovery.