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Property prices have grown significantly for decades and therefore not only has property tax become a hot topic for politicians but also many properties have built up capital gains which inhibits a desire to sell.
For most individuals and businesses property decisions are some the biggest decisions faced and the tax landscape a key component of that process.
As the Chancellor of Exchequer dreams up ways to secure more tax revenues property tax is high on the agenda and below represents the list of concerns.
Area
Tax
Issue Summary
Disposal of Own Home
Capital Gains Tax (“CGT”)
Tax rates are higher than other gains
Reliefs are available based on the uses during one’s ownership period
Income from Own Home
Income Tax
Rent a room relief potential available
Taxable profits at marginal rates
Commercial use may jeopardise CGT reliefs and IHT reliefs
Buy to Let Individuals
Rental profits taxable but potential to utilised spouses tax brackets where appropriate
Interest tax relief restriction on higher (and additional) rate taxpayers
Buy to Let and Developer Individuals/Partners
Stamp Duty
Additional 3% stamp duty on purchase of an additional property
Reliefs and refunds available in certain circumstances
Buy to Let Companies
Company Tax
Rental profits taxable
Capital tax tax on disposals but inflation adjustment allowed to capitalised costs
Buy to Let / Developer Companies
Annual Tax on Enveloped Dwellings (“ATED”)
Tax based on value banding to catch non-residents but wide scope of reliefs available but these reliefs have to be claimed at the start of the tax year in April
Buy to Let / Developer Corporates
Default 15% rate and price >£500,000 if not used commercially. But commercial users will obtain standard company buy to let rates
Developer Corporates
Corporation tax
Disposals are treated as disposal of stock and tax is based on taxable profits. No inflation allowance
Property Investments
Inheritance Tax (“IHT”)
Generally considered passive investment assets and so not relief from IHT
Development Assets
Development businesses can qualify for reliefs from IHT
Residential Property Income
Value added tax (“VAT”)
Exempt from VAT so VAT is not charged nor reclaimed
Potential exists in limited circumstances to recover some VAT on costs
Commercial Property
Usually exempt so VAT is not charged nor reclaimed
Able to opt to tax to enable VAT to be charged and reclaimed. This is usually irrevocable and affects any future disposal
Property is a complex and highly valuable asset class where advice is highly recommended.
If you would like more information or would like to speak to us direct then call us on 020 8567 3451. Or if you would prefer, ask us a question online.