Britain’s rental market will lose one million homes in the next decade if Labour goes ahead with a capital gains tax (CGT) raid, research shows.

Chancellor Rachel Reeves is reportedly considering aligning CGT with income taxes – a move that will spark an “exodus” of landlords, the report by Capital Economics warned.

CGT is paid on the profits a landlord makes from selling their property and is capped at 24pc. However, if this was increased in line with income taxes, higher earning landlords would be left paying out 45pc of their profits to the taxman.

Capital Economics estimates the policy would mean 910,000 landlord-owned homes would vanish from the market in the next 10 years.

It said 790,000 more properties that had been rented would be sold and there would be 120,000 fewer purchases.

The findings come after Telegraph Money launched a campaign calling on Labour to end its war on property investors to stop even more leaving the market.

Currently, a basic-rate taxpayer pays 10pc CGT on assets and 18pc on property, while a higher-rate taxpayer will pay 20pc on assets and 24pc on property.

The Chancellor has been repeatedly warned that increasing this rate too aggressively would backfire and lose the Treasury vital revenue.

Simon Gammon, managing partner at Knight Frank Finance, said an increase would see a wave of second homes and rental properties put up for sale ahead of any deadline.

Increasing tax on the profits of a property sale would be the latest in a series of moves by successive administrations that have made it harder for landlords to operate.

On average, rents have risen 41.5pc over the past decade, yet landlords say profits are dwindling.

Changes such as removing mortgage interest relief and scrapping the 10pc wear and tear allowance have eaten into profits at a time of increased costs and mortgage rates.

The new Renters Reform Bill prohibits Section 21  “no-fault” evictions, making it harder for landlords to act against delinquent tenants.

It has left increasing numbers of landlords struggling to stay afloat.

According to trade body UK Finance, the number of buy-to-let mortgaged properties taken into possession has more than tripled over the past three years – up from 210 in the second quarter in 2021 to 710 in the same quarter in 2024.

There are also currently 13,570 such mortgages with arrears worth over 2.5pc of the balance, more than double the 6,260 over the same period in 2021.