Property Tax: Autumn Statement Announcements – By George!
As 2015 has already seen George Osborne unveil two budgets, it is no surprise that the Chancellor’s focus for the Autumn Statement was on spending and economic issues. Housing continues to be a major issue and there were a number of proposals announced affecting property owners, which include:
- The introduction of a new 3% Stamp Duty Land Tax (“SDLT”) surcharge arising on purchases of second homes and buy-to-let properties to take effect from 1 April 2016,
- Capital Gains Tax (“CGT”) arising in respect of residential property will be due within 30 days of completion with effect from April 2019,
- By 2020 landlords earning over £10,000 from property will need to use digital accounts to update HMRC quarterly (or even more frequently); and,
- The filing and payment window for SDLT to reduce from 30 days to 14 days with effect from April 2017.
Below I wanted to focus on the new 3% SDLT Surcharge and the 30 day payment window for CGT on residential property.
3% Stamp Duty Land Tax Surcharge on Second Homes and Buy-To-Let Properties
This measure is intended to apply where a person buys an additional residential property, such as a second home or a buy-to-let. The 3% charge will apply to each rate on the relevant slice of the price paid for the property, although it appears that properties purchased for £40,000 or less will still attract nil SDLT.
HMRC have given an example which indicates that the rates will work as follows:
| Residential Property Price | 1st home | 2nd home |
| For total price of £40,000 or less: | Nil | Nil |
| For total price over £40,000: | ||
| · the first £125,000 of the price | Nil | 3% |
| · the next £125,000 of the price (from £125,001 to £250,000) | 2% | 5% |
| · the next £675,000 of the price (from £250,001 to £925,000) | 5% | 8% |
| · the next £575,000 of the price (from £925,001 to £1.5 million) | 10% | 13% |
| · the remaining amount (the portion above £1.5 million) | 12% | 15% |
A key point which is not currently clear is how the new SDLT rate will work in circumstances where an individual is moving house and needs to purchase their new house prior to selling their old house or wishes to simply let out their old house. There is to be a consultation on how the replacement of main residences will operate, which will hopefully answer these questions.
There will be an exclusion to this new SDLT rate for corporates or funds that make a “significant investment” in residential property. Precisely what this will mean will be subject to the Government’s forthcoming consultation but the suggestion has been that an entity that owns more than 15 residential properties would qualify for this exemption. It is currently unclear whether this exemption will extend to individuals or partnerships.
30 day payment window for CGT on Residential Property
Under present rules, CGT is typically due by 31 January following the end of the tax year in which the gain was realised. This can mean, where a sale is made at the start of a tax year, the CGT is not paid until 22 months after the date of completion of the disposal.
The Chancellor has announced a major change so that for gains made in respect of residential property this window should be reduced such that the payment due date will be 30 days from the date of completion. This measure will come into effect from April 2019, from which date it is intended that HMRC’s digital systems will be ready to support payment of the tax. The relief available to gains made on properties which qualify as an individual’s principal private residence will not be affected, however it is not yet clear whether such gains will still need to be reported to HMRC.
In summary, the trend appears to be an increased level of scrutiny of the activities of property owners but many of these proposed changes are due to come in gradually so most individuals will have time to review their affairs.
Whilst every effort has been made to provide information current at the date of publication, tax laws around the world change constantly. Please note that this article has been produced based solely on the Autumn Statement announcement documents and prior to any draft legislation being produced. Accordingly, the material should be viewed only as a general guide and should not be relied on without consulting your local KPMG tax adviser for the specific application of a country’s tax rules to your own situation.
If you need assistance with any related matters, please do e-mail Simon at simon.johnson@kpmg.co.uk.