non-residents<\/a> who dispose of UK residential property.\u00a0 The chargeable gain only applies to value generated from April 2015.\u00a0 For properties owned prior to April 2015 the chargeable gain can be determined by either a time apportionment of the gain or determining the actual increase in value from April 2015.\u00a0 If the latter is adopted then an April 2015 valuation would be necessary to determine the post 2015 gain.\u00a0 A connected change was the requirement for non-residents to report the gain within 30 days of conveyance.\u00a0 Unless the non-resident had an existing relationship with HMRC then the Capital Gains Tax may also have to be paid within the 30 day period.<\/p>\nAlthough UK Capital Gains Tax rates fell on 6 April 2016 the reduction did not apply to gains from residential property.\u00a0 A further change on 6 April 2016 impacted residential landlords.\u00a0 Traditionally these landlords claimed a 10% wear and tear allowance against furnished rental income to reflect the cost of repair and replacement of furnishings and white goods within a property.\u00a0 Although this was an optional treatment it was the method widely used by landlords.\u00a0 From 6 April wear and tear allowance has been abolished and landlords should claim tax relief on the actual cost of replacing these assets.<\/p>\n
New rules for purchases of second homes or buy-to-lets<\/h2>\n
April 2016 was also the month in which new rules were introduced which resulted in higher SDLT rates on purchases of second homes or residential buy to lets.\u00a0 For effected properties SDLT is 3% higher than the rate of SDLT which would otherwise apply, but there are exemptions for lower value properties, caravans, mobile homes and boat houses.\u00a0 There is a specific relief for individuals who move home and buy their new home before selling their previous home.\u00a0 These individuals will need to pay the higher rate of SDLT on the purchase of a second home and then recover the excess SDLT on sale of the first home.\u00a0 There is a time limit to sell the former home and a time limit to claim a refund.<\/p>\n
Offshore property developers<\/h2>\n
Offshore property developers of UK sites have been able to structure their affairs so that part of the development profit is charged to UK tax.\u00a0 This does not allow for a level playing field between the domestic developer, who is fully charged to UK tax, and the offshore developer.\u00a0 Legislation was introduced on 5 July 2016 to level this playing field.<\/p>\n
Rental income<\/h2>\n
Individuals who receive income from renting out rooms in their home could receive up to \u00a34,250 per year without tax.\u00a0 From April 2016 this has been increased to receipt up to \u00a37,500 per year. The Government accept that some people can generate small amounts of income from rentals of, for example, their homes whilst on holiday.\u00a0 From April 2017 there will be a new \u00a31,000 allowance for property income with individuals not needing to declare, or pay tax, on sums less than the allowance.<\/p>\n
Mortgage Interest<\/h2>\n
From April 2017 mortgage interest on loans to acquire buy to let properties will only be tax deductible as if the landlord is a basic rate taxpayer.\u00a0 This tax relief restriction is being phased in over 4 years with the full restriction applying from April 2020.\u00a0 The mechanism to generate the relief is a credit against tax liabilities and not a deduction from rental profits.\u00a0 This can result in taxpayers falling into higher rates of tax and therefore being unexpectedly subject to the restriction. As the changes only apply to those paying income tax this has led to questions about the benefit of holding these properties in a company.\u00a0 Such a change in structure needs to be carefully thought through as it leads to other considerations.<\/p>\n
From 6 April 2017 it is anticipated that there will be changes to the non-domicile legislation which will bring more individuals into the UK Inheritance Tax net and could result in properties which they own through offshore structures being subject to UK Inheritance Tax for the first time ever.<\/p>\n
The ATED legislation was introduced in 2013 and was a major shift in the UK property tax base.\u00a0 Who would have believed that it would be the start of a number of changes?\u00a0 Further changes are expected in 2017.<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
Compared to today, property investment taxation before 2013 was relatively straightforward with one of the more complex discussions being convincing non-residents that they really could realise profits on investment sites without UK Capital Gains Tax.\u00a0 Changes were made in 2013 which proved to be the start of a wholesale reform to various aspects of property[…] <\/p>\n
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