Buy To Let Hammered Autumn Statement 2015

Buy To Let Hammered in Autumn Statement 2015.

Given the lack of available and affordable housing in the UK, the Chancellor has gradually been putting the squeeze on 2^nd homes and buy to let property.  Previously, we had seen three moves:

1. Introduction of capital gains tax on property owned by non-ordinarily UK resident expats and foreign nationals
2. The reduction of the window, when you move out of your main residence but buy another main residence, but keep ownership of the first.  Previously, we have 3 years to sell the first property before it became chargeable to capital gains tax, it is now 18 months
3. Introduction of the Annual Tax on Enveloped Dwellings (ATED), a yearly tax on high value residential properties owned inside a company to avoid stamp duty.  This was designed to discourage wealthy people, both in UK and foreign owners, from buying up large swathes of property.  In addition, the value at which a property becomes subject to ATED has reduced, so even more properties are now taxed

The Autumn Statement, confirmed yet another double hit on 2^nd homes and buy to let investment property, that of Stamp Duty and Capital Gains Tax.

Stamp Duty Buy to Let

The Chancellor confirmed an increase in the rate of Stamp Duty Land Tax (SDLT) when buying second home/buy to let/investment residential properties worth more than £40,000 from 6^th April 2016.  An extra 3% will be payable on top of the standard residential stamp duty rates.  The new rates for 2^nd property purchase stamp duty are as follows, charged in tiers:

• 0% - £0 to £40000
• 3% - £40000+ to £125000
• 5% - £125000 + to £250000
• 8% - £250000 + to £925000
• 13% - £925000 + to £1500000
• 15% - £1500000 +

For example, a buy to let property bought for £350,000 will have SDLT payable in tiers at 3% on £85000 (£40k to £125k), 5% on next £125,000 and 8% on final £100,000   

Property bought inside a corporate envelope e.g.  Ltd Company will be taxed at above rates until value is over £500,000 then 18% £500,000 + enveloped dwellings *

Pay Now Capital Gains Tax on Residential Property

Capital gains tax is not payable when we sell our main residence.  It is payable if we sell other residential property, e.g.  buy to let investments or properties that used to be our home but we have now let them.

Capital gains tax is a charge to income tax, in short, we pay CGT as part of our self-assessment return, usually filed in the following January, nearly 10 months after the end of tax year.  This could mean that if you sold your buy to let property on 7 April 2015 (i.e.  within Tax Year 2015/16) meaning you may not have to complete self-assessment until 31 January 2017, some 22 months later. 

The Chancellor confirmed that a consultation will take place in 2016 to reduce the time to pay CGT on residential disposals to just 30 days.  It has been suggested that the new rules will likely start in April 2019.  We suggest this new move will combine with the introduction of the new tax accounts that we will all have alongside technically filing tax returns every 3 months when the current self-assessment is replaced.

Autumn Statement Key 'Pension and Investment' Points: