The Summer Budget introduced some nasty changes to property tax, with the removal of the wear and tear allowance and the restriction of tax relief on finance costs. These were both in relation to the taxation of buy to let landlords and the Chancellor continued that theme in his Autumn Statement today.
Realising that the restriction of tax relief on finance costs would only affect those landlords who had mortgages on their properties, he announced a change to the SDLT regime which will affect cash investors as well.
From 1 April 2016 purchasers of buy to let and second homes will pay an additional 3% SDLT compared to those purchasing their only or main home. Therefore not only attacking buy to let landlords, this measure will also affect taxpayers who have holiday homes, flats in cities etc. even if they are not renting the properties out for commercial gain.
A consultation will be launched into whether there will be exemptions for corporate purchasers and funds owning more than 15 residential properties. Obviously the measure will not affect properties already owned by landlords.
The other SDLT announcement will affect all purchasers and (possibly even more directly) all conveyancing lawyers. The filing and payment window for SDLT is to be reduced from 30 days to 14 in 2017/18 which the Chancellor said is due to the government making the payment and filing system easier and faster.
Finally, the other property tax change announced was also in relation to payment windows, this time in relation to Capital Gains Tax (CGT). Currently CGT on all gains is due by 31 January following the end of the tax year in which the gain was made. This is changing in relation to gains on residential property from April 2019.
From the effective date CGT on residential properties will be payable 30 days after the transaction. No detail has been released as yet but it is hard to see how it will work in practice, presumably a CGT return similar to the current SDLT return will need to be filed by the conveyancer.