NRLA urges capital gains tax reform to account for inflation

The National Residential Landlords Association (NRLA) is calling for capital gains tax (CGT) reform to prevent investors from being taxed on property price increases driven by inflation. The organization argues that between 2015 and 2024, only one-fifth of house price growth represented a real gain, while the remainder was attributable to inflation.

NRLA Chief Executive Ben Beadle stated that taxing inflation devalues investments and may discourage potential investors from providing rental housing. The association is urging the Chancellor to adjust acquisition prices and capital expenditure for inflation before calculating taxable gains. The proposal aims to provide relief based on the duration of ownership while ensuring that speculative, short-term trading remains subject to standard taxation.

Separately, discussions regarding CGT changes highlight how indexation—adjusting the cost base of an asset in line with the Consumer Price Index (CPI)—impacts tax calculations. Under such rules, a capital gain is recognized if the sale price exceeds the indexed cost base, whereas a capital loss is calculated using the original cost base, as indexation does not apply to losses. This asymmetry can create a ‘tax drag’ for investors.