The anticipated tax hikes have sparked a rush among second homeowners in holiday hotspots to sell their properties before the October budget. British novelist Tilly Bagshawe and her businessman husband Robin Nydes are among those deciding to sell their £2.85 million home in the Cotswolds, despite the property being steeped in happy memories. “I wouldn’t say I felt rushed, exactly,” says Bagshawe, 51, who has owned the six-bedroom property in Lower Slaughter since 2012.
“But obviously these tax changes will have a material impact on what will ultimately be my kids’ inheritance and future.”
Bagshawe emphasizes that while she does not resent paying capital gains tax on their second home, she aims to make the best choices for her family. With the murmur of a capital gains tax (CGT) increase under the new Labour government, the decision to sell their cherished home has become a financial necessity. Bagshawe and her family, who let out the house to holidaymakers when absent, are among numerous second homeowners moving to dispose of assets following Sir Keir Starmer’s warning of a “painful” autumn budget where “those with the broadest shoulders” will bear the heaviest burden.
The speculation that CGT could rise from 24% to up to 45% has particularly alarmed investors and property owners. For Bagshawe and Nydes, who anticipate making a profit of roughly £500,000 from the sale, that could mean a tax bill of approximately £225,000—£100,000 more than they would pay currently.
Tax hike spurs home sell-offs
Bagshawe acknowledges the dilemma as a “first world problem,” yet she also stresses the significant benefits that holiday lets bring to the local economy. “In terms of local mood, in areas like ours which rely heavily on tourism, there’s always been a certain section of the community who see people who rent out their second homes as ‘the enemy,'” explains Bagshawe. “But there is also another group, including many local business owners, who recognise the contribution to rural economies that holiday lets provide.”
The market is now witnessing a surge in property listings in response to the expected tax changes.
Gina Farrow of The Property Consultancy states, “There has been a significant increase in the number of properties being offered for sale in anticipation of a rise in capital gains tax. Those who have holiday cottages that once produced a good income stream have been hit by higher mortgage rates and fewer bookings.”
This increase in listings has led to a softening of prices as buyers remain hesitant amid the uncertainty. Rachel Reeves, the new Chancellor, had previously pledged not to increase CGT, but rumours suggest she is poised to announce a rise in the upcoming budget.
Eighteen months after her initial pledge, this potential policy shift has left many second homeowners scrambling to protect their investments. The situation highlights the broader concerns among property owners regarding possible VAT on school fees, additional property-related tax hikes, and punitive restrictions on holiday lets. As the budget announcement looms, the market’s response will continue to evolve, reflecting the apprehensions and strategic moves of those affected.
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