By Kupesh Patel FCCA
Partner
Elsby & Co
WHAT was expected to be a ‘rough ride of a Budget’ for landlords and property developers has rightly been overshadowed by the COVID-19 plans in the Budget. Before the Budget, we already knew that Section 24 (restriction of finance costs) would be fully phased in. Landlords can no longer claim finance costs as a deductible expense in arriving at taxable rental profits but will instead get a 20 per cent ‘tax reducer’. The impact will be to push taxpayers into the higher tax brackets (£50,000 plus), which would then bring into play the High Income Child Benefit charge and start eroding away at personal allowances (currently £12,500) once taxable income goes over £100k.
We also knew that the Capital Gains Tax system would be changed for disposals of UK residential properties by UK resident individuals/trustees. From 6 April, there will be a 30-day CGT reporting and payment regime. What this means is that anyone selling a residential property in the UK will need to report the disposal to HMRC within 30 days, together with a payment on account for the CGT.
Other changes to Capital Gains Tax on disposals of UK residential properties will be the shortening of Principal Private Residence relief from 18 months to nine months. What this means is that if you sell a buy-to-let or second home, you can only claim the last nine months as exempt from CGT if you lived in it at any point.
And the final change to Capital Gains Tax will be the reformation to Lettings Relief. It now only applies in circumstances where the owner also lives/lived at the property being rented out.
There was an increase to SDLT for non-UK residents, where they will have to pay an additional two per cent SDLT, in addition to the three per cent levy on second properties. This only affects individuals and not UK Ltd companies where the shareholders live abroad. This is in addition to the three per cent levy.
Entrepreneurs’ Relief has been reduced from £10m to a £1m lifetime limit and this could affect those with furnished holiday lets and serviced accommodation, which qualify for Entrepreneurs’ Relief.
The only ‘good news’ was the temporary relief on business rates which could help property developers who are converting commercial buildings. And there was an increase in structures and buildings allowance from two per cent to three per cent, enabling more capital allowances to be claimed against taxable profits.
If any of the issues raised above affect you and you would like more information, then contact me on 01604 678470.