NRLA proposes inflation-adjusted Capital Gains Tax for landlords
The National Residential Landlords Association (NRLA) has submitted a proposal to reform Capital Gains Tax (CGT) calculation, suggesting tax be levied only on real gains after inflation, ahead of the October 2026 Budget.
The NRLA’s submission to the Treasury highlights that current CGT arrangements result in landlords paying tax largely on inflationary gains rather than actual increases in property value. It recommends adjustments to the CGT framework to better reflect real economic growth and support investment in rental property improvements.
The association also calls for the unfreezing of Local Housing Allowance rates and investment in a retrofit workforce to enhance energy efficiency in the private rented sector.
Details of the NRLA’s CGT reform proposal
The NRLA’s proposal stems from analysis of house price growth and inflation between 2015 and 2024. During this period, average UK house prices rose by 46.2%, while general inflation increased by 34%, meaning the real growth in property values was only 9.1%. The association argues that under current CGT rules, approximately 80% of the tax paid on capital gains reflects inflation rather than genuine increases in asset value.
To address this, the NRLA suggests CGT should be calculated by considering the original purchase price, Stamp Duty, acquisition costs, and capital improvements. This would allow tax reliefs to be applied based on the length of ownership, ensuring that tax is paid only on real gains after deducting inflationary effects.
Such a change aims to create a fairer tax system for landlords and encourage a more dynamic property market. The NRLA emphasises the importance of landlords being able to unlock capital to invest in upgrading properties, particularly for energy efficiency improvements, which aligns with broader government goals on sustainability.
Context and implications for landlords and letting agents
Capital Gains Tax has long been a contentious issue for landlords. The current regime can penalise property owners for inflationary gains, reducing incentives to hold or improve rental properties. By proposing an inflation-adjusted CGT, the NRLA is seeking to make the tax system more equitable and supportive of long-term investment in the private rented sector.
This proposal, if adopted, could have significant implications for landlords’ financial planning and portfolio management. It would potentially reduce the tax burden when selling properties, freeing up capital for reinvestment or improvements. This is particularly relevant as landlords face increasing costs from regulatory changes, energy efficiency requirements, and rising operational expenses.
Letting agents may also see indirect effects, as landlords’ willingness to invest in upgrades or expand portfolios could increase. The proposal aligns with calls for a more sustainable rental sector, where improving property standards is financially viable.
Practical effects and considerations for landlords
Should the government implement an inflation-adjusted CGT, landlords will need to maintain detailed records of purchase prices, acquisition costs, and capital improvements to accurately calculate taxable gains. This will require careful documentation and possibly updated accounting practices.
Landlords with longer ownership periods could benefit from reliefs based on tenure, incentivising longer-term investment rather than short-term speculation. This may influence decisions on when to sell or refurbish properties.
The NRLA’s additional proposals to unfreeze Local Housing Allowance rates and invest in a retrofit workforce also highlight the ongoing pressures on rental affordability and property standards. Landlords should monitor these developments closely, as changes could affect rental income potential and obligations around energy efficiency upgrades.
Uncertainties and what to watch next
The NRLA’s proposals are currently submissions ahead of the Chancellor’s Budget on 28 October 2026. It remains uncertain whether the government will adopt the suggested inflation adjustment for CGT or implement alternative reforms.
Details on how the proposed reliefs would be administered, including the calculation methods and qualifying costs, have yet to be clarified. Landlords should watch for official guidance and legislative changes following the Budget announcement.
Additionally, the government’s response to calls for unfreezing Local Housing Allowance rates and support for retrofit workforce development will be critical for rental market dynamics and compliance with energy efficiency standards.
What landlords should consider now
- Review and organise records of property purchase prices, Stamp Duty payments, acquisition costs, and capital improvements to prepare for potential CGT calculation changes.
- Stay informed on the upcoming Budget announcements and any government consultations or guidance related to CGT reform and rental sector support measures.
- Assess the potential impact of unfreezing Local Housing Allowance rates on rental income and affordability for tenants.
- Plan for energy efficiency improvements and monitor developments in retrofit workforce initiatives that may affect compliance obligations and funding opportunities.
Supporting landlords with regulatory and tax compliance
The Landlord Association (TLA) offers membership that provides access to practical compliance resources and guidance to help landlords prepare for changes in tax and regulatory frameworks. Our developing ORBIT platform, currently in BETA testing, is designed to assist landlords and letting agents in organising property portfolios, managing rental documents, and maintaining records of key transactions such as acquisitions and improvements.
ORBIT’s features include tools to record purchase details, track capital expenditure, and support evidence retention for tax purposes, which can be particularly useful if CGT calculation methods change. Members can also access up-to-date compliance information and monitor regulatory developments through TLA’s resources.
Exploring TLA membership and ORBIT BETA access can help landlords stay organised and better prepared for forthcoming Budget changes and evolving tax obligations.
Looking ahead, landlords should maintain vigilance on government announcements and be ready to adapt their tax planning and property management strategies accordingly.
Sources: Landlord Today
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