No Major Surprises for Landlords

Breaking News – Budget Review for Landlords:

Aww bless. Hammy Hammond hopes to stop Uncle Joe Corbyn’s socialist revolution by giving out railcards to Millennials.

After all the scare mongering in the press in recent weeks, I had a really bad feeling about this Budget. But in the end there were very few nasty tax surprises.

Contrary to what the newspapers predicted there was:

• No increase in the additional 3% stamp duty paid by landlords
• No big cut in the VAT registration threshold
• No scrapping of higher-rate tax relief on pension contributions
• No freezing of the corporation tax rate – it will still fall to 17% in 2020
• No increase in dividend tax rates
• No freezing of the personal allowance or higher-rate threshold
• No further attack on the self employed

The main tax changes include:

Stamp Duty Land Tax

From today first time buyers paying £300,000 or less for a residential property will pay no SDLT.

Those paying between £300,000 and £500,000 will pay no SDLT on the first £300,000 and 5% between £300,000 and £500,000.

A first time buyer is defined as someone who never owned an interest in a residential property in the United Kingdom or anywhere else in the world and who intends to occupy the property as their main residence.

First time buyers purchasing property for more than £500,000 will not enjoy any relief.

Some changes have also been made to the extra 3% charge on additional properties. For example, the higher rates for additional dwellings will no longer apply where an individual buys a property from their spouse or civil partner.

Income Tax

From April 2018 the income tax personal allowance will go up from £11,500 to £11,850 and the higher-rate threshold will go up from £45,000 to £46,350.

The Government has reaffirmed that it is committed to raising the personal allowance to £12,500 and the higher-rate threshold to £50,000 by 2020.

Unfortunately these changes will not apply in Scotland (with the exception of the personal allowance). Scots will have to wait until 14 December to see what nasties the Scottish Government has in store for them next year.

National Insurance

The Government is delaying various national insurance changes by one year (until April 2019), including the abolition of Class 2 national insurance (paid by the self employed) and reforms to the treatment of termination payments.

The Government has confirmed again that it will no longer proceed with the aborted increase in Class 4 national insurance paid by the self employed from 9% to 11%.

Companies Indexation Relief

This change will affect property investors who use companies. At present they can claim indexation relief when they sell property. This essentially means they only pay tax if their properties rise in value faster than inflation. No relief will be available for inflation from 1 January 2018.

VAT

The VAT registration threshold will not be cut significantly which will be a big relief to small business owners. It will, however, be frozen at £85,000 for two years from April 2018.

Personal Service Companies

The Government has already changed the rules for those who work in the public sector through their own companies (essentially forcing them to pay income tax and national insurance like regular employees).

The Government has indicated that a “possible next step” would be to extend the reforms to the private sector and will “carefully consult on how to tackle non-compliance in the private sector”.

Trusts

In 2018 the Government will consult on how to make trust taxation “simpler, fairer and more transparent”.

Rent a Room Relief

The Government is investigating how rent a room relief is used and wants to target it at longer-term lettings,

Mileage Rates for Landlords

Landlords who use their cars in their business will be given the option to claim tax relief for their travel by using the mileage rates (45p per mile for the first 10,000 miles, 25p thereafter).

Council Tax – Empty Homes

Local authorities will be able to increase the council tax premium from 50% to 100%.

Electric Vehicles

From April 2018 there will be no benefit in kind charge if employees use their employer’s electricity to charge their electric vehicles.

Capital Gains Tax

Capital gains tax due on disposals of residential property will have to be paid within 30 days. This change was due to take place in April 2019. It has now been deferred until April 2020.

ISAs

The subscription limit for 2018/19 remains unchanged at £20,000. The limit for Junior ISAs will go up to £4,260.

Pensions Lifetime Allowance

This is the maximum you can invest in pensions without adverse tax consequences. It will increase in line with inflation from £1 million to £1,030,000 for 2018/19.

Business Rates

In England the planned switch in indexation from RPI to CPI will be brought forward to 1 April 2018. RPI almost always gives a higher figure for inflation than CPI so this will provide some relief to businesses.

Non-Resident Capital Gains

At present non-residents have to pay capital gains tax on residential properties but not commercial properties. Gains that accrue after April 2019 will now be taxed.

Non-Resident Companies – UK Property Income & Gains

From April 2020, rental income received by non-resident companies will be subject to corporation tax, not income tax. Gains from selling UK property will be subject to corporation tax, not capital gains tax.

Fuel Duty and Cars

Fuel duty will be frozen once again in 2018/19.

A vehicle excise duty supplement will apply to new diesel cars registered from April 2018.

The company car tax diesel supplement will increase from 3% to 4% from 6 April 2018.

By Nick Braun

Nick Braun is the founder of Tax Cafe which publishes tax guides for landlords including How to Save Property Tax and Using a Property Company to Save Tax

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