CGT alignment proposal: implications for property capital and finance

A proposal with implications beyond the headline rate

PropertyWire reports that Andy Burnham has indicated support for aligning Capital Gains Tax rates with Income Tax, potentially increasing the rate from 24% to 45%. The proposal has been framed as a fairness measure, but it is not presented as implemented policy. Even so, policy signals can influence commercial decisions before any formal change, particularly where owners have discretion over when to realise gains.

For the property market, the central issue is not simply the amount of tax payable on a completed disposal. It is how a higher rate could alter the willingness to build businesses, sell assets, recycle equity and accept the risks attached to borrowing. These behavioural effects would matter to developers, investors and lenders assessing the timing and certainty of exits.

The risk and reward of business ownership

PropertyWire cites business sales broker Adam Walker’s example of a letting agency manager earning £100,000 a year and considering business ownership. Walker says independent letting agents typically achieve profit margins of no more than 15%. On £1 million of turnover, this would produce £150,000 annually, only £50,000 more than the salaried position, while the owner may also provide personal guarantees for bank loans and premises leases.

The example highlights a broader financing consideration. The potential value created at exit is part of the reward for accepting operational risk, debt obligations and personal exposure. If more of that value is taxed when realised, some prospective owners may conclude that the additional return does not justify the risk. In the agency sector, where PropertyWire says consolidation is continuing, this could reduce the number of new independent operators and affect the future pool of acquisition targets.

Transaction timing could become less predictable

Walker notes that business owners and investors can often control when they realise capital gains. According to PropertyWire, he said significant numbers of owners completed sales before the November 2025 Budget and again before the end of the 2025-26 tax year in April 2026. His argument is that a materially higher rate may encourage owners to defer disposals rather than generate additional tax receipts.

For property finance, this creates a potential two-stage effect. An anticipated change could accelerate selected transactions ahead of a deadline, followed by a period in which owners retain assets for longer. That could make acquisition pipelines uneven and reduce the visibility of exit-led debt repayment. Borrowers may seek to refinance rather than sell, while lenders may place greater emphasis on credible alternative exits and the resilience of interest servicing where disposal dates move.

Developers and investors could also reassess the point at which they release capital from completed or stabilised assets. If the after-tax proceeds from a sale become less attractive, holding may appear preferable. However, retaining capital in existing assets could limit its availability for subsequent acquisitions or projects. The resulting effect would be less about a single transaction and more about the speed at which capital circulates through the market.

Inflation and policy uncertainty add complexity

Walker also argues that a substantial part of some taxable gains reflects inflation rather than a real increase in value, and that inflation should be deducted before CGT is calculated. PropertyWire notes that the CGT debate was extensively discussed in 2024 before earlier tax changes, while Walker believes those arguments have not been fully reflected in current discussions.

Burnham has previously ruled out abolishing stamp duty, according to PropertyWire, suggesting a selective approach to property tax reform. Until there is greater policy clarity, finance assessments may need to distinguish between a sponsor’s preferred disposal and the alternatives available if tax considerations change the timing.

What finance counterparties will examine

• How sensitive the planned exit is to a higher CGT rate.

• Whether debt can be serviced if an asset is retained for longer.

• Whether refinancing provides a realistic alternative to disposal.

• How delayed sales could affect equity available for future projects.

• Whether acquisition opportunities may cluster around policy deadlines.

The proposal remains a policy position rather than a confirmed change. Its significance for property finance lies in behaviour: when owners sell, whether entrepreneurs accept business risk and how quickly equity is recycled. Those factors could shape transaction volumes and financing requirements well before any new rate takes effect.