Blick Rothenberg

Tax year end planning: Property Tax

17.02.2015

Stamp Duty Land Tax (“SDLT”) reform

A reminder that a radical change to the SDLT regime was announced in the 2014 Autumn Statement. This abolished the "cliff-edge" system that applied when the tax was calculated. The changes became effective from 4 December 2014.

Individuals purchasing property for up to £937,500 are now better off compared to the old regime, but thereafter the SDLT payable has increased. The current rates of SDLT are
as follows:


 

Property Price (£)

Tax rate charge on part of

property price within each tax band

0 - 125.000 0%
125,001 - 250,000 2%
250,001 - 925,000 5%
925,001 - 1,500,000 10%
1,500,000 + 12%



The penal SDLT rates applying to purchase of UK residential properties by non-natural persons (for example, companies) continue to apply. Therefore, consideration should be given to disposing of the shares in such companies, rather than the property itself, to mitigate the costs involved.

Annual Tax on Enveloped Dwellings (“ATED”) extension
Following the extension to ATED announced in the 2014 Budget, the first stage of this extension will come into force from 1 April 2015, bringing properties valued over £1million within the regime. The relevant charge will be £7,000 per year and this is due, together with the annual return, in October 2015.

In addition, significant increases to the existing annual charges were announced in the 2014 Autumn Statement. The new charges take effect from 1 April 2015 and are as follows:

 

Property Values

Applicable charge

for 2015/16

Over £1m up to £2m  £7,000
Over £2m up to £5m £23,350
Over £5m up to £10m £54,450
Over £10m up to £20m £109,050
In excess of £20m £218,200


It is important for property owners to revisit their 1 April 2012 valuation, to check if the property now falls within the reduced scope of ATED.

Capital Gains Tax ("CGT") extension to non-UK residents
From 6th April 2015, non-UK residents, including individuals, companies and trusts, will be within the scope of CGT when disposing of UK residential property.

The CGT rates will mirror those applicable for UK tax residents; 18% or 28% for individuals (depending on their total UK income and chargeable capital gains), 28% for trusts and 20% for companies.

The charge will effectively only apply to gains arising from 6 April 2015, with the taxpayer generally being able to choose between rebasing the cost to the value as at 5 April 2015 or to time-apportion the gain.

Disposals of other assets by non-UK residents continue to be outside the scope of the new CGT rules. This would include, for example, a sale of shares in a non-UK resident company, even when that company owns a UK residential property.

Click here for information about CGT on residential properties owned by non-UK residents.

Principle Private Residence (“PPR”) relief restriction
Along with the changes to CGT for non-UK residents, new rules will also come into force from 6 April 2015 impacting the availability of PPR relief for all taxpayers.
 

Going forward, PPR relief will only be available where:

  • the property is located in the same country the owner is tax resident, or
  • the individual (and/or their spouse/civil partner) spends at least 90 midnights in the property each tax year.

 

Non-UK residents must notify HMRC if they wish to treat the property as their PPR at the point of disposal. It should be noted that these changes could also impact UK tax residents who wish to claim PPR relief on non-UK properties.

 

It is important for individuals to monitor and review their worldwide residential property position, in order to maximise available PPR relief.