Property tax expert Stephen Griffiths was the extremely popular 2nd speaker at our January PIM, as property people flocked to find out more about the new tax changes, highlighted in the Chancellor’s autumn statement in late November.
Stephen is a tax partner with leading local accountants Milsted Langdon.
He is a member of the Chartered Institute of Taxation, the Association of Taxation Technicians and the Institute of Indirect Taxation.
Now based in Milsted Langdon’s Yeovil office, he spent several years with a leading firm of accountants in Bristol.
Stephen has extensive experience in dealing with personal and business tax compliance. He also has comprehensive expertise in indirect taxes – including VAT and stamp taxes – and plays a key role within the firm’s specialist VAT Consultancy service. He can be contacted by email: [email protected].
Stamp Duty – Proposed changes
Stephen first highlighted that the current consultation document is just that – it was issued in January and consultation closed on 1 February. The final legislation will be confirmed in the budget, due in March – so these are proposals at present and could change.
The proposal is to add 3% extra stamp duty to the existing rates, for “buy to let” purchases, completed from 1 April 2016. This will be a significant increase, although the stamp duty regime was reformed in 2014, to reduce the previous rates (brought in just a little earlier, in 2012).
Key points highlighted were :
- Applies only to residential property, not commercial property
- Applies if the purchaser already owns a residential property and is buying a 2nd (or more) residential property
- Applies to completion dates after 1 April 2016
- Does not apply if contracts were already exchanged before 25 November 2015
- Applies to holiday lets
- Does not apply to building plots
- Does not apply to mixed use property e.g. a shop with flat above
- Does not apply if you are selling your own home and buying another as your home (within 18 months)
- Does apply if you are moving from rented property to buy your own home (i.e. if you already own a BTL residential property)
- Married couples are treated as one unit
- There may be exemptions for owners of 15 properties or more or those buying 15 properties
Incorporation / Income Tax Deductions from 2017
Buying property through a company is being considered by many investors, due to the introduction of limits to loan interest relief for rental income from 2017. The changes are being phased in over 4 years and will restrict the relief to basic rate tax rates.
Stephen stressed that whether incorporation is worthwhile will always depend on individual circumstances – including your other income and your plans – and everyone should take their own specific advice from an expert.
However, with corporation tax at 20% and due to fall to 18%, buying properties through a company will be beneficial for some people – generally those who are (or will be) higher rate taxpayers, as companies will be able to offset loan interest in full, unlike individuals. Basic rate taxpayers (including your rental income) will not be affected.
However there are Stamp Duty and Capital Gains Tax implications for transferring property into a company.
Another option may be to operate via a trading partnership, as special rules apply.
This was a very informative presentation, which generated lots of questions about this very important area for investors. We’re looking forward to finding out exactly what the new stamp duty rules will be, after the consultation – and we do recommend that you take advice on this area, from an expert.
Do make sure you join us next month for more property advice:
Join us on 25 February 2016 at Holiday Inn, Bristol City Centre, 6-9 pm.
For more info and to reserve your place click below –
We look forward to seeing you there.
The team at Property Options