Budget 2016 – Landlord reactions

Budget 2016 – Landlord reactions

14:00 PM, 16th March 2016, About 7 years ago 137

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The Chancellor George Osborne has just delivered his Government’s Budget.

Quick reference details for Landlords Below:

Stamp Duty surcharge of 3% on residential property to apply to all investors regardless of size.

Stamp Duty on commercial property transactions is to be reformed. Our understanding is that bandings will be applied similar to residential property, albeit with a zero rate up to £150k and then 2% of any amount over £150K and up to up to £250K and then 5% of any amount over £250k. As an example, on a property that costs £300,000 the SDLT would be £4,500 – i.e. £0 on the first £150k, 2% on the next £100k (£2,000) and finally 5% on the next £50k (£2,500). If our understanding is correct then this will also impact on on related transactions of 6 or more connected property transactions (e.g. at incorporation of a property portfolio). More on this HERE

Capital Gains Tax Reduced – from 28% to 20% for higher rate tax payers and from 18% to 10% for low rate tax payers from April 2016. However there will be an 8% surcharge on residential property leaving Landlords selling at the same old rate!

Maximum interest relief against profit capped at 30% of turnover, but this is only for the largest companies and will not affect Landlords. This was a concern for Landlords pre-Budget.

Tax free income tax allowance threshold – increased to £11,500 from April 2017

High rate tax threshold – increased to £45,000 from April 2017

Corporation tax – decreased to 17% by 2020

Insurance premium Tax IPT – increased 0.5% and funds raised to be spent on UK flood defences (£700million)

Fuel Duty – Frozen again this year

Class 2 National Insurance for self employed to be scrapped

The Office for Budget Responsibility has downgraded growth forecasts due to external economic headwinds from the uncertainty in the Global economy.

Growth for 2015 was 2.2% but the forecast has reduced from 2.4% to 2.0% in 2016 with 2017 growth of 2.2% and then 2.1% for the following years.

 


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John Lawty

14:45 PM, 16th March 2016, About 7 years ago

Capital Gains Tax will remain the same for residential property that is not your main home.

https://www.gov.uk/government/news/budget-2016-some-of-the-things-weve-announced

Relevant section.
16. Capital Gains Tax rates will be cut from 6 April 2016, but residential property will still be taxed at current rates

Capital Gains Tax is a tax on the gain you make when you sell something (an ‘asset’) that has gone up in value. It is paid at a basic or higher rate depending on the rate of Income Tax you pay.

From April 2016, the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%.

There will be an additional 8 percentage point surcharge to be paid on residential property and carried interest (the share of profits or gains that is paid to asset managers).

Capital Gains Tax on residential property does not apply to your main home, only to additional properties (for example a flat that you let out).

Lancelot

14:53 PM, 16th March 2016, About 7 years ago

CGT - the 8% surcharge for residential property means two things for me:

(1) Explicitly separate treatment of capital gains from property - a cultural change for the future?

(2) Property sale gains may still be at charged at 28%, but this is with a reduced headline rate of CGT - if this were to go back to 28%, then the 8% surcharge for property could persist.

This is bad news. Beware further creeping development.

Dr Monty Drawbridge

14:54 PM, 16th March 2016, About 7 years ago

Anyone else feel a glimmer of hope that the choice not to go ahead with exemptions on stamp duty for multiple purchases could be a sign that they are concerned about the discrimination being argued against in judicial review?

NW Landlord

15:19 PM, 16th March 2016, About 7 years ago

Looks like a wait and see approach as he hardly touched buy to key i do think the judicial review is hanging over myself

Dr Rosalind Beck

16:00 PM, 16th March 2016, About 7 years ago

Reply to the comment left by "Dr Monty Drawbridge " at "16/03/2016 - 14:54":

No, Monty, no glimmer of hope from that, I think. He wants to penalise anyone buying existing property as his pals are all in the new-build and Build to Rent category. This is why he doesn't need to exempt companies from the new CGT surcharge - they are in the building game primarily and if in the future they want to sell that will be way in the future and the rules can be tailor-made for them later on.

Technically, the Government could argue that they are now not discriminating between 'individual' landlords and corporations with the new CGT rules, but they are in practice as it is only 'individual' landlords who are being pushed/forced into selling because of the outrageous tax on the main part of our turnover. As someone said above, he still wants to have all our profit and even a large chunk of non-profit, but not allow us offset the costs of producing the profit. Everyone you explain this to knows it's mad and grossly unfair. Let's hope we can get a judge to see that too.

The contradictions are also amassing. Why treat individual landlords and corporations differently in part of the tax system but the same in others? It's completely inconsistent. It is also notable that he didn't even try and justify excluding us from his little CGT gift - the last time he tried justifying it in the Summer Budget he looked like an ignoramus and a fool, so I suppose he's chosen not to try and justify the unjustifiable.

David Asker

16:11 PM, 16th March 2016, About 7 years ago

Here's a question.

In the SDLT summary it states:

The government has decided to increase the 18 month period to 36 months, for both of the scenarios set out above, as the most appropriate way to provide additional support. This change gives extra time to those who are moving home in challenging circumstances to rearrange their affairs.

The 36 month time period will commence from 25 November 2015 for those who had sold a previous main residence prior to the Spending Review and Autumn Statement 2015, in order to provide additional transitional support.

I am currently purchasing a property for main residence but keeping my old property also and should complete by 31st of this month.

Does the 2nd paragraph in the SDLT summary above mean that I will have to pay the additional 3% as it is after 25 Nov 2015?

John Mcgowan

16:46 PM, 16th March 2016, About 7 years ago

Once again the scumbag chancellor has decided to descriminate against landlords by excluding them from the reduction in CGT . In fact probably the only real benificiaries would be MPs with 2 properties or the rich who can afford not to have to rent out their second home! This is no surprise to me at all he is what I have said he is.

Landlord Lucan

16:48 PM, 16th March 2016, About 7 years ago

I'd like to think I have a reasonable command of the English language, but having just read through this document: https://www.gov.uk/government/publications/clarification-to-finance-costs-restriction-for-landlords/clarification-to-finance-costs-restriction-for-landlords I'm now more confused now that I was to start off with.

Can anyone else decipher what this means:

"Legislation will be introduced in Finance Bill 2016 in order to:

...

- ensure that the total income restriction to the tax reduction applies where the relevant finance costs or property profits are higher than the total income" ?

It sounds vaguely like it might mean that you can't be taxed more than you're earning (which would be logical), but I have my doubts somehow.

For starters, what exactly is the "restriction to the tax reduction"? (Is that the relief or the reduction in relief, or something else?) And how on earth can you equate finance costs with profits? And how can profit be higher than total income???

Alison King

17:41 PM, 16th March 2016, About 7 years ago

Reply to the comment left by "Landlord Lucan" at "16/03/2016 - 16:48":

I thought that too, and would also like clarification. My initial understanding was that it meant that if, after we have been taxed on our mortgage interest and reimbursed the 20%, we make an overall loss, that will be made good through tax relief. Also that losses from previous years can be brought forward. But how that would work defeats me, and I might have completely misunderstood in any case.

Kathy Evans

17:59 PM, 16th March 2016, About 7 years ago

Reply to the comment left by "James dengel" at "16/03/2016 - 14:20":

The huge government PDF says CGT on residential property will still be 28%.

"cut the higher rate of Capital Gains Tax from 28% to 20% and the basic rate from 18% to 10% from April 2016 (except for residential property and carried interest), and extend entrepreneurs’ relief to long term investors in unlisted companies" p7

"1.171The government wants to ensure that companies have the opportunity to access the capital they need to grow and create jobs, and wants the next generation to be backed by a strong investment culture. Budget 2016 announces that, from 6 April 2016, the higher rate of Capital Gains Tax (CGT) will be reduced from 28% to 20%, and the basic rate will be reduced from 18% to 10%. There will be an 8 percentage point surcharge on these new rates for carried interest and for gains on residential property. This will ensure that CGT provides an incentive to invest in companies over property. Private Residence Relief will continue to ensure that an individual’s main home is not subject to CGT." p 51

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508193/HMT_Budget_2016_Web_Accessible.pdf

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