Autumn Statement – Changes for Property Taxation

There were two changes announced in the Chancellor’s Autumn Statement of 25th November which will have significant impact for buyers and sellers of property.  This was otherwise quite a light Chancellor’s statement for the overall amount of tax news (well, we have had two Budgets already this year with significant tax changes).

Stamp Duty Land Tax

The government continues its efforts to even up the residential property market away from Buy to Let and second home owners, and back in favour of owner-occupiers.  For purchases on or after 1 April 2016 higher rates of Stamp Duty Land Tax will be charged on purchases of residential property which will be used as Buy to Lets or second homes. Buy to Let landlords owning properties personally already face restrictions to their mortgage interest tax relief from 2017, as announced in the summer budget.

The new SDLT rate is based on a premium of 3% above existing SDLT rates, and with a lower starting point of £40,000 for the new rate.  The differential between the two rates will have a more marked impact on the low-medium priced property investors – the typical investment area for BTL landlords – as can be seen in our examples below:

AS Graph

 

The new rate will not apply to caravans, mobile homes or house boats.  Companies or funds making significant investments in residential property (owning more than 15 properties) will also be exempt from the higher rate given the role of such investment in supporting the government’s housing agenda.

Capital Gains Tax Changes

From April 2019, sellers of residential property will be required to make a payment on account within 30 days of the Capital Gains Tax (CGT) due on the disposal. Gains qualifying for Private Residence Relief (i.e. properties that qualify as your main home) will not be affected.  Currently, for self assessment taxpayers CGT is payable by 31st January after the end of the tax year in which the disposal took place, and for companies nine months after the end of their accounting period.  The detail is to be announced, but the change may be modelled on the new CGT payment rules for non-resident owners of residential property, which apply from April 2015.

For more information on this topic please contact Rob Durrant-Walker or enquiry@garbutt-elliott.co.uk – 01904 464 100