Every April it’s typical for business networking groups and meetings with your accountant to centre around new government changes that affect a variety of tax, business and investment issues.
This year is no exception, with the property tax sphere undergoing a variety of changes new to 2016 that have a direct impact on residential and business property taxes.
Here, we’ve outlined the 2 key changes to property tax in 2016 to keep you up to date.
Homeowners pay stamp duty when they purchase an interest in land and in 2016, this is set to rise. A new SDLT banding system has been introduced to calculate tax on the percentage of the property value that falls within a specific banding. While the new SDLT system was introduced for residential properties on 4th December 2014, the tax on non-residential and mixed-use property only came into action on 17th March 2016. This introduction has far-reaching implications for business premises.
In recent months, and with the new tax increase on the horizon, there has been a property boom, particularly in the buy-to-let market, with investors keen to purchase properties before the new rules come into play. As a result, this pushed UK housing prices up by 0.8% month-on- month in March 2016 to a record high with the average house price hitting £200,000 for the first time.
In the Summer Budget 2015, the government announced that landlords would be unable to receive tax relief and deduct all of their financial costs from their property income. Instead, this will be reduced to a basic reduction.
Introduced from 6 April 2017, up to 75% of a landlord’s financial costs will be deducted from the property income between 2016-2017. These financial costs will decrease by 25% each year until 2020, when the in tax year 2020-2021 all financing costs incurred by landlords will be given as a basic tax rate reduction.
In addition, on 1st April 2016, an extra 3% SDLT will be charged to residential properties that are purchased as second homes or buy-to-let properties.
For more information on the new property taxes that have recently been introduced, speak to our team.