Landlords Are Paying Record Capital Gains Tax — And That Changes Everything for Investors

HMRC has just reported one of the most striking tax revenue figures in recent UK property history. In January 2026 alone, Capital Gains Tax receipts hit £16.985 billion — a 69% increase on January 2025. Over the full 12-month period from February 2025 to January 2026, the government collected £20.6 billion in CGT, up 44% from the £14.3 billion collected in the preceding year. Landlords are widely identified as a significant driver behind these figures, and the implications reach well beyond tax planning.

What's Behind the Surge in CGT Receipts

The timing is telling. The October 2024 Budget raised CGT rates on residential property gains, aligning them more closely with income tax. Basic rate taxpayers now face 18% CGT on property gains; higher rate taxpayers face 24%. The annual exempt amount had already been slashed to just £3,000 by April 2024, meaning even modest gains now generate meaningful tax bills. Combined, these changes created a powerful incentive to sell before the new rates crystallised — and the revenue data confirms that many landlords did exactly that.

Wealth managers have noted that some investors sold earlier than necessary, having anticipated CGT rates being equalised with income tax rates entirely. That did not happen, but the anticipation alone was enough to trigger a wave of disposals. The result: a record government windfall, and a measurable shift in the composition of the private rental sector.

The Landlord Exodus and What It Means for Supply

The scale of this CGT surge reflects something more structural than a one-off tax rush. Landlords across the UK have been navigating a sustained tightening of the regulatory and fiscal environment — Section 24 mortgage interest relief restrictions, the Renters Rights Act, Section 21 abolition, the 5% additional dwelling stamp duty surcharge introduced in October 2024, and now higher CGT rates on exit. The tax system increasingly treats property investment as something to be discouraged at entry, during ownership, and on disposal.

The consequence is a contraction in the private rented sector. When landlords sell, the properties are typically acquired by owner-occupiers rather than other investors, removing units from the rental pool permanently. With fewer rental properties in circulation, void periods are shrinking in most regional markets and rents continue to push upward in cities where demand is strongest — Manchester, Leeds, Birmingham, Bristol, and across much of commuter-belt England.

What This Means for Investors Still in the Market

For investors who have chosen to remain active, this environment is presenting a counterintuitive opportunity. Reduced competition from buy-to-let purchasers, combined with tighter rental supply, is producing stronger yields in well-chosen locations. Gross rental yields of 7–9% are increasingly achievable in northern cities, a figure that would have been unusual five years ago. The landlords leaving the market were often those operating single properties on thin margins, unable to absorb the cumulative cost of legislative compliance and rising operating expenses.

Institutional and portfolio investors with the balance sheet to absorb upfront costs — higher stamp duty, CGT planning, compliance infrastructure — are finding themselves in a less crowded market. The case for multi-unit freehold blocks and title splitting strategies has strengthened further: acquiring a block as a single commercial or mixed-use asset, splitting titles, and refinancing individual units generates value at every stage, while spreading the tax events more strategically across different periods or vehicles.

CGT Planning Has Never Been More Important

The record CGT revenues also serve as a reminder that exit strategy should be built into every acquisition from day one. With the annual CGT exemption now at just £3,000 and higher rate property CGT fixed at 24%, a landlord selling a portfolio property with a £200,000 gain faces a tax bill of approximately £47,280 — before accounting for any allowable expenses. Running property through a limited company changes the calculus significantly: corporate gains are taxed at the main corporation tax rate (25% for profits above £250,000), but the company can reinvest profits, delay distributions, or structure exits more flexibly than an individual can.

The January 2026 CGT data suggests that many investors made reactive decisions under time pressure ahead of the October 2024 Budget. The investors who will perform best over the next cycle are those who model their CGT position across multiple exit scenarios before buying — not after. Whether that means using a limited company structure, spouse transfers, pension contributions to reduce taxable income in the year of disposal, or phased sales across tax years, the planning work pays for itself many times over.

The data is clear: the UK tax environment has fundamentally repriced property investment. For those willing to plan carefully, transact strategically, and focus on assets where value is created rather than simply held, the conditions are arguably more favourable than they have been in years. The competition has thinned. The yields are improving. The question is whether investors are positioned to take advantage.