UK Tax Changes in 2021 and How They Impact Property Investors

Posted by Lang Town & Country on 28th August 2021 -

Back in March 2021, Rishi Sunak unveiled a large range of tax changes during his Spring Budget.

Estate agents in Plymouth welcomed the holiday on Stamp Duty Land Tax (SDLT) and its subsequent extension.

The announcement came as a huge boost for those looking to sell their home or buy a new one.

There were also a number of other changes which had a powerful emphasis on encouraging capital spending as a route to achieving recovery within our economy.

Although the then-Chancellor announced changes to corporation tax, there was no increase within the Capital Gains Tax (CGT) rate.

A number of significant tax changes have been introduced in recent years in relation to the UK property market. These changes are likely to have had an impact on the majority of UK homeowners. Whether they are individuals or corporates, UK residents or non-residents. And whether or not they own their property for investment or trading purposes.

Here, Lang Town & Country Director Richard Rabin explains some of the more recent tax changes and how they impact property investors.

Stamp Duty Land Tax (SDLT)

Stamp Duty Land Tax (SDLT) applies to all acquisitions of property in England and Northern Ireland.

The rate of this tax varies according to the value of the property and whether it is residential or non-residential.

In July 2020, the Chancellor announced a temporary and immediate holiday on Stamp Duty on properties up to half-a-million pounds in England or Northern Ireland.

The Spring Budget in March saw the Chancellor extend this holiday until June 30, 2021.

To smooth the transition, the nil-rate band is now £250,000 (double its normal level) until the end of September. We will only return to the usual £125,000 threshold from October 1st.

The existing three per cent additional SDLT for buyers of second homes, corporate buyers and other property investors will remain. And a further two per cent surcharge for non-UK residents has been applied to residential property acquisitions since April 1st 2021.

This surcharge affects non-resident individuals and non-natural persons (e.g. companies), additionally to the existing SDLT rates of up to 15 per cent.

In other words, the highest rate for non-residents may be 17% (Scotland and Wales have their own regimes).

Find more information on the Gov.uk website here.

New rules for residential property disposals

As of April 6th 2020, taxable capital gains made by individual UK residents, trustees or personal representatives of someone who has died on the disposal of residential property, should be reported to HMRC within 30 days of completion date.

For these purposes, a disposal will also include gifts in addition to sales of such property. Payment of the estimated Capital Gains Tax (CGT) arising on the disposal(s) must be made within this 30-day deadline.

There are exceptions to the new reporting and payment rules for disposals by UK residents (i.e. in cases where no CGT comes up on disposal).

Non-resident immovable property gains

Before April 6th 2019, non-UK residents were not subject to Capital Gains Tax (CGT) in disposals of UK immovable property. The only exception to this rule was in relation to certain disposals of residential property, or where a trade was being carried on through a permanent establishment in the UK.

However, the scope of the tax net in the UK significantly widened after April 6th 2019.

Now, non-UK residents are now subject to UK tax on gains on all direct and certain indirect disposals of interests in UK immovable property, subject to certain exceptions.

The new rules apply to any or all disposals of UK real property by non-residents who have not previously been within the scope of UK tax (for example, UK commercial property).

Corporation tax changes

In the Spring Budget, the then-Chancellor also announced that from April 2023, the rate of corporation tax would increase to 25% on profits over £250,000.

The rate for profits under £50,000 stays at 19%, and there is now also relief for businesses with profits of less than £250,000.

This rate change will impact UK resident companies and also non-UK resident company investors in relation to property.

Business rates holiday

The Chancellor’s Spring Budget saw the existing rates relief available to tenants extended.

These reliefs were available for eligible retail, leisure and hospitality businesses until July 2021. Business rates bills will continue to be discounted in these sectors by up to two thirds until March 2022.

The extension of relief is customised and primarily targeted at small- and medium-sized businesses which have been forced to shut during the Covid-19 pandemic.

Incentives to encourage investment in Freeport tax sites

Earlier this year, Plymouth and South Devon was named one of eight new tax-break freeports in the UK.

The city now stands to benefit from a £100 million investment and jobs boom.

Tax reliefs have also been announced to encourage investment in Plymouth and the seven other Freeport tax sites.

They are Humber, Liverpool City Region, East Midlands Airport, Felixstowe & Harwich, Solent, Thames, and Teesside. These are designated and recognised in law as geographical areas where businesses can benefit from Freeport-specific tax reliefs. 

They include:

● Stamp Duty Land Tax (SDLT) relief on the purchase of land or property within Freeport tax sites in England

● Relief on Business Rates in Freeport tax sites in England

Why now is a GREAT time to become a landlord in Plymouth

Although the second phase of the stamp duty relief is coming to an end in September, we do not see this affecting the demand from investors now coming back to the market.

The main problem we have at the moment is that we don’t have enough stock for the tenants we want to try and help.

We think it’s going to continue to be really busy and now is a really good time to become a landlord.