Over recent months, property industry professionals have listened intently hoping to hear potential for changes to property related taxes and legislation. Anything mentioned by the now prime minister, Boris Johnson and his government, to do with property during the campaign and since his election has been picked up and speculated over.
The majority will have likely been hoping for a clear indication that the tax reforms which charge higher rates to additional home owners be abolished and that the Stamp Duty Land Tax brackets overall would be changed.
Suggested changes to Stamp Duty Land Tax
Since the idea was floated, the idea that Stamp Duty Land Tax (SDLT) would be payable by the seller appealed to many.
The chancellor of the exchequer, Sajid Javid, has now clarified that he would not support this change to SDLT.
Shifting the liability onto sellers would have made the cost of entry into the property market much lower for first time buyers and also had a positive effect on those moving up the ladder to larger properties. Those in support of this shift said that the amount of tax collected would not change, simply who was paying it.
Critics of the suggested alteration to the property tax system however believed that sellers would simply add the stamp duty onto the price of the property, in the end meaning the buyer would end up paying it anyway.
Stamp Duty Land Tax in the UK
For clarity (at the time of writing), in England and Northern Ireland, if you are not a first time buyer, the rates for the purchase of residential property are as follows:
0% on the first £125,000
2% on £125,001-£250,000
5% on £250,001-£925,000
10% on £925,001-£1.5m
12% on any value above £1.5m
Investors would not be deemed a first-time buyer even if this is their only ever purchase of property anywhere in the world, as the government’s definition includes the provision that the property must be being bought to be the buyers main residence.
If the property is an additional purchase, which is the case for most investors, then there is an additional 3% to be paid on top of the normal stamp duty rates, applicable to the overall value of the property. The government website offers a stamp duty calculator if you’re unsure of what would be applicable to your potential purchase.
There might also be different rules and rates applicable to those purchasing property within a corporate body, such as a company structure.
Prior to proceeding with any property purchase, it’s sensible to understand the tax implications of your purchase, we would always advise you to speak with a reputable advisor before committing to buying a property.
What changes can we expect to property taxes from the new government?
Although Sajid Javid is holding his cards close to his chest when it comes to any changes that might be made to property-related taxes, most recently telling the Times to ‘wait and see for the budget’ there is some hope from his latest interview.
The newspaper reported that Mr Javid said “I’m a low-tax guy” and that he wanted to see “simpler taxes”. With the current stamp duty system being rather complicated, we can hope from Mr Javid’s comment that there may be change afoot.
The next budget is set for the autumn and its entirely likely that it will not take place until after the 31st October, although there has been no clear indication of this. Logically, it would mean any fiscal changes made in the budget can be made based on the terms of how the UK has departed the EU.
As many choose to wait and see what happens next there are excellent opportunities available to investors looking for property now. Talk to us about your plans to purchase an investment property, we’re available on +44 (0) 2039507939 or send us an email at email@example.com.