There are a number of changes to laws and taxation which were announced in the 2018 Autumn Budget which will have an effect on the property industry.
The first of these is aimed at providing further assistance to first time buyers looking to get onto the property ladder. Under the new rules, all first-time buyers who are purchasing shared equity homes will be eligible for first time buyer’s relief on properties worth up to £500,000. This will provide significant help to people who are looking to purchase their first home whether in London or outside the capital by allowing them to pay less on stamp duty meaning that they can buy a wider variety of properties which would otherwise be unaffordable. There will also be a consultation published in January 2019 about an SDLT surcharge of 1% for non-residents who are purchasing residential property in England and Northern Ireland.
In addition, the government has pledged £500m for the Housing Infrastructure Fund. This is designed to enable further construction of new homes which are needed in order to combat the severe housing shortage in the UK. Current predictions show that this will enable an additional 650,000 new homes to be built around the UK to help deal with the shortage of housing around the country. This will provide more choice to potential purchasers as well as providing new business for property industry professionals.
The government has also committed to working with local authorities throughout England to deliver 13,000 new homes. This is aimed at combatting the housing crisis and providing a new generation of social and affordable housing. This new policy will doubtless affect a number of different developer or landowner clients as the government aims to revitalise local housing in the UK. In addition, the residence nil rate band (RNRB) for inheritance tax will increase to £150,000 and this policy will come into effect from 6th April 2019.
There have also been significant changes to business rates which are aimed at preserving the high street and preventing small retailers from going out of business. Business rates will be reduced for two years from April 2019 by a third for retail units with a rateable value of under £51,000. This is subject to state aid limits but is predicted to benefit up to 90% of retail properties. This will lead to a revitalisation in the retail lettings industry as more properties become affordable for a wide range of applicants. Additionally, there is also a 100% business rates relief for public lavatories. This is aimed at helping to keep these amenities open and running with many closing or being put to alternative uses.
There have also been significant changes to capital gains tax. The final period capital gains tax (CGT) for owner occupied residential property will be halved – from 18 months to 9 months. This policy comes into effect from April 2020 and will affect many residential properties which had previously been affected. There will also be a 2% capital allowance which will apply to qualifying capital expenditure on all new non-residential properties and structures where all the contracts are entered into on or after 29th October 2018.However, this relief will not be available for the cost of land or residential dwellings.
In addition, there have been changes to the taxes which non-residents pay on gains. All gains made by non-UK residents on non-residential property will be subject to taxation. In addition, non-UK residents will also be subject to tax on widely held funds which were not previously included, life assurance companies, and diversely held companies. In addition, non-residents will also be taxed on gains on interests in UK property rich entities such as shares in companies which derive at least three quarters of their value from UK land. This will have an effect on disposals made after 5th April 2019. Furthermore, there will be an anti-forestalling rule for arrangements which are entered into after 21st November 2017.
Additionally, the government also announced that the annual tax levied on enveloped dwellings (ATED) for 2019/20 will be increased in line with inflation. An enveloped dwelling is defined as any property worth over £500,000 which is owned by a company, partnership, or collective investment scheme.
This is a wide range of changes and it will be interesting to see if these have the desired effect on the property industry.
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