Property developers and landlords
The Chancellor previously announced two measures which caught investors by surprise however, there were no further announcements this time around.
Firstly, the cut to mortgage tax relief (relief Landlords can claim on mortgage interest) will be set at the basic rate of tax – currently 20% and secondly the 3% stamp duty surcharge on investment properties and second homes from April 2016.
Large-scale investors in buy-to-let properties will pay the chancellor’s three percentage point stamp duty surcharge from April, contrary to a suggestion made in the Autumn Statement that those with more than 15 properties would be exempt.
Although landlords will be subject to higher tax payable on their rental profits, it is unlikely that the above two measures will significantly affect the buy to let market as property investors main objective is to invest for longer term capital growth.
More welcome news for commercial property investors is that the Chancellor announced a reduction in capital gains tax rates from 28% to 20%. Whilst this will not apply to residential property, the sale of commercial property will now be taxed at the lower rates and this will undoubtedly mean a surge in commercial property sales.
For those purchasing commercial property, the stamp duty rates will change with effect from midnight tonight (subject to transitional provisions) which will mean that although the highest rates will increase to 5%, the method of calculating it includes the lower bands. A good incentive for individuals, as well as companies, to invest in commercial property.
Good news for landlords wishing to rent out homes via the internet as they will receive a £1,000 tax free allowance.
The changes to business rate thresholds will mean local authorities and landlords can be more competitive and flexible to attract investment. Businesses will be more likely to want to move and upgrade their premises as their business expands.
In addition, commercial property investors should welcome this change as there is less likelihood their tenants will struggle to pay these bills.
ANNUAL TAX ON ENVELOPED DWELLINGS.
There was no further update on the simplification of the administration of ATED, in particular for property businesses eligible for reliefs.
ATED (Annual Tax on Enveloped Dwellings) was first announced in the 2014 budget to tackle tax avoidance and to ensure that those wrapping residential property in corporate and other ‘envelopes’ and not using them for a commercial purpose, such as development or renting them out, pay a fair share of tax.
Although there are reliefs available where residential properties are being used on a commercial basis, the administrative and compliance costs of filing the ATED returns will still be extremely onerous to many.
CAPITAL GAINS TAX
There was no further information provided such as whether there will be any reliefs for capital losses made prior or after the disposal, whether the annual exemption will remain unchanged and able to be utilised. In addition there is still a question mark as to whether any capital gains tax paid will be able to be reclaimed in the future once the final tax returns have been submitted and if there are available losses.
In short, if you are a millennial or a newsagent, pretty well, as the Budget came with lots of help for small businesses. But if you are a buy-to-let investor or an IT contractor, it is not such good news.