The Chancellor, in his Autumn Statement, has announced a series of changes to the taxation of UK residential property. The announcement comes on the back of a raft of other changes that have been introduced over the past 3 years which are explained in more detail in our previous blog of 28 September 2015, "Everything you need to know about recent changes to the UK residential property tax regime".
SDLT on second homes
From April 2016, Stamp Duty Land Tax (‘SDLT’) will be 3% higher than the standard SDLT rates for purchases of additional residential properties worth more than £40,000. For homes worth more than £1,500,000, the marginal rate will now be 15%. It is not yet clear how a second home will be defined or how overseas buyers will be affected. The change does not apply to corporates or funds making significant investment in residential property, but the Government will be consulting on this exemption.
CGT on disposal of UK real estate to be paid within 30 days
The Chancellor has announced that from April 2019 the Government will require payment on account of Capital Gains Tax (‘CGT’) within the much tighter timeframe of 30 days of completion of disposal of a UK property. This replaces the current time limit of 21 months but aligns the payment window with a recently introduced rule for non-UK residents. The change will not affect gains on properties which are not liable for CGT owing to Private Residence Relief. Payment of CGT will be made through the new digital tax system but the draft legislation in 2016 is expected to provide much needed detail on how the policy will work in practice.
CGT for non-UK residents disposing of UK property
The government will amend the computations required by non-UK residents who dispose of UK residential property by removing a double charge that occurs in some circumstances. The double charge will be removed with retrospective effect from 6 April 2015. An unspecified omission will also be corrected with effect from 25 November 2015.
HMRC will be granted the power to prescribe circumstances when a CGT return is not required by non-residents. Further, CGT will be added to the list of taxes that the government may collect on a provisional basis.
ATED Relief Extensions
The Government will extend the reliefs available from the Annual Tax on Enveloped Dwellings (‘ATED’). The reliefs will be extended to include equity release schemes, property development activities and properties occupied by employees from 1 April 2016. ATED only applies to UK residential property held in an envelope such as a company.