Monthly archive for September 2019

Changes to Stamp Duty On December 4th 2014 stamp duty on property purchases was reformed by the Government. At the time the Chancellor George Osborne stated around 98% of purchasers in England and Wales would pay less after stamp duty reform. Changes to stamp duty meant people who buy homes for under £937,000 would pay less in tax when compared to the old system. From April 2016 a 3% Stamp Duty Land Tax surcharge has applied to purchases of buy to let property and second homes. In Scotland a similar LBTT 3% surcharge applies to additional property transactions from April 2016. Old Stamp Duty System With the old system before December 2014, stamp duty was considered to be a “slab tax” where higher rates were incremented and applied to the whole property purchase price. The old system meant there were sudden increases in stamp duty liability as the purchase price rose above the next threshold. This had a negative impact for both purchasers and vendors with costs increasing or values artificially diminishing around each threshold. New Stamp Duty System Since December 2014 the tax system has become “progressive” and rate increases are applied between stamp duty thresholds only.This means stamp duty rate increases are no longer applied to the whole purchase price. Because of this progressive nature, the new system has been compared to income tax. The updated stamp duty thresholds range from £125,000 to £1.5 million. Changes to Stamp Duty in Scotland Following on from changes to Stamp Duty in England Wales and N.Ireland, stamp duty in Scotland was reformed on April 1st 2015. Stamp duty in Scotland has been replaced by Land and Buildings Transaction Tax (LBTT). LBTT in Scotland works in a very similar way to Stamp Duty in the rest of the UK. LBTT is a progressive tax with slightly different thresholds ranging from £145,000 to £750,000. Buy to Let and Second Homes Levels of stamp duty for buy to let property and stamp duty for second homes has now changed. Changes were announced by the chancellor in his 2015 Autumn statement and came into effect from April 2016. The stamp duty changes introduced a significant rate increase for property being purchased in addition to a main residence. From 1st April 2016 a 3% surcharge has been applied to buy to let and second home purchases with a new lower initial threshold of £40,000. Given that the vast majorityRead more →

Consultation On Property Wear And Tear Allowance In the Summer Budget 2015 the Government confirmed its intention to introduce measures to improve how landlord’s businesses are taxed. The new measures which are detailed in the full Consultation Document are designed to provide consistency and fairness in the taxation of rented properties. However, you still have until 9 October to submit your comments and responses to the consultation. An outline of the new measures is given below and we’ve also produced a handy fact sheet which you can print out: The changes The current 10% Wear and Tear Allowance which allows landlords to reduce the tax they pay, regardless of whether they replace the furnishings in their property, will be replaced. From April 2016 landlords will only be allowed to deduct the costs they actually incur for replacing furnishings in their rental properties. Eligibility All landlords will be eligible for the relief respective of whether they let their properties on an unfurnished, part furnished or fully furnished basis. However, Furnished Holiday Lets and commercial premises are excluded. NOTE: The relief will only cover replacing existing furnishings – landlords cannot claim for the initial purchase of furnishings (i.e. when they buy a new property and furnish it for the first time). How it will work Landlords will be able to claim for the capital cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use; such as beds, wardrobes, tables, sofas, fridges, washing machines, carpets, curtains, cutlery and crockery. However, if the landlord sells the item being replaced, the sale price of that item must be deducted from the purchase price of the replacement and the tax relief can only be claimed on the remainder. Further, landlords cannot claim for ‘improvements’. If the replacement item is an improvement on what was there before (i.e. a washing machine is replaced with a washer-dryer), then only the cost of a like-for-like replacement can be claimed. NOTE: Fixtures integral to the building (i.e. baths, toilets and boilers) that are not normally removed by the owner if the property was sold are not included. The impact Landlords will no longer need to decide whether their property is sufficiently furnished to make a claim as the relief because applies to all rented properties no matter the level of furnishing. With the current 10% allowance, the higher the rent, the larger the tax relief. In some areas of the country, 10%Read more →