Ding, Ding!! Seconds out – Round 8! George Osborne today delivered his 8th Budget Statement as Chancellor of the Exchequer. Many consider the number 8 the luckiest of all numbers, and in Chinese culture it is favoured by business due to its association with prosperity, wealth and success. Although, in boxing terms, not many fighters predict a knock out in round 8. So, has Mr Osborne finally delivered the sucker punch to Walsall landlords?!
This is the type of stuff I would rather not talk about but you know, it affects us as landlords so it’s always best to stay ahead of the game. I’ll try not to bore you with all the changes some of which include changes to the following:
- Personal Allowances
- Income Tax Bands
- Further Changes to ISA’s
- Pension Allowances Reduced
- Savings Income Tax Free 2016/17
- New Dividend Rules Start 06 April 2016
- Tax on Loans to Participators from 06 April 2016
- Capital Tax Rates
- Further Changes to CGT Entrepreneurs’ Relief
- Lower Corporation Tax Rates
- Tax Free For ‘Micro – Entrepreneurs’
- New Corporate Tax Loss Rule
- Stamp Duty Changes
- Tax Relief on Small Donations to Charity
- VAT Registration Limit
I think that’s your bag!! For fear of putting my readers to sleep I’m going to spare you on the items above which I feel don’t make an impact on the majority of us.
From the off, Mr Osborne claimed the government has a track record of supporting businesses with low taxes. Many Walsall businesses would of course dispute that suggestion, but for the sake of balance, let’s start with the positives – of which there are a few.
- Firstly, beyond the Government’s established commitment to reduce Corporations Tax Mr Osborne announced that the headline rate would fall to 17 per cent in 2020. This represents an 11 per cent drop since 2010 when the rate was a whopping 28 per cent.
- Secondly, the Chancellor announced major changes to business rates, namely that the threshold for small business rate relief will rise from £6,000 to £15,000 while higher rate relief will increase from £18,000 to £51,000.
There were also major announcements concerning personal taxation:
- Increase Income Tax Personal Allowance to £11,500 from April 2017.
- Increase Higher Rate threshold to £45,000 from April 2017.
- Abolition of Class 2 National Insurance contributions from April 2018.
- From 2018, landlords who are keeping tax records digitally and providing regular digital updates to HMRC will be able to adopt pay-as-you-go tax payments to better manage their tax flow.
For those investing in Walsall property, Mr Osborne’s 8th outing is likely to be less closely associated with prosperity than further heartache.
Expected rule changes concerning the Stamp Duty Land Tax levy imposed on purchases of additional properties were confirmed, surprisingly without any exemptions for larger portfolio landlords or corporations.
In fact it was confirmed that:
- There will be no exemption from the higher rates for large investors.
- Purchasers will have 36 months rather than 18 months to claim a refund of the higher rates if they buy a new main residence before disposing of their previous main residence.
- Purchasers will also have 36 months between selling a main residence and replacing it with another without having to pay the higher rates.
- A small share in a property which has been inherited within the 36 months prior to a transaction will not be considered as an additional property when applying the higher rates.
- The government will provide £60 million to enable community-led housing developments in rural and coastal communities, including through Community Land Trusts, where the impact of second homes is particularly acute.
- The South West will receive around £20 million of this funding.
- The Government will consider married couples who are separated and living in circumstances that are likely to become permanent, as divorced for the purposes of applying the higher rates.
The new rules will apply to completions from 1 April 2016, meaning a reduction in new investment is highly likely while investors in Walsall and in general weigh up their options.
Furthermore the Chancellor announced plans to increase Insurance Premium Tax (IPT) from 9.5 per cent to 10 per cent from October 2016.
Finally, and perhaps most disappointing for those investing in the PRS, the Chancellor announced a 8 per cent drop in CGT rates to 10 and 18 per cent respectively for those paying basic or higher rate income tax. Great news on face value, until you realize that in addition to the reduction Mr Osborne announced a new CGT levy of 8 per cent payable on gains realized by the sale of residential property. i.e. landlords and property investors will continue to pay exactly the same rates – regardless of the tax cut.
More on this in coming weeks…if you wish to discuss any of the above or require an expert to assist you to work out how the changes affect you personally, please feel free to get in touch with me. I’m no tax expert or specialist in accounts but I know people who are.
Phone: 01922 311016