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With the numerous changes impacting property investors announced in the 2015 Budget and autumn statement, we summarise the ones coming into force in April 2016.
Stamp Duty Land Tax (SDLT) on additional properties
There is an increase in SDLT on the purchase of buy to let properties or second homes that complete after 1 April 2016. The increased rate will be 3% above the current SDLT rate(s) and will be charged on purchases of residential properties (above £40,000). This proposal and the fine details are expected to be finalised in the forthcoming Budget on 16 March.
Rent a room Relief
Under the existing rules an individual my let out a room in their own residence and so long as the rental income does not exceed £4,250, the rental income is tax free. This limit will increase to £7,500 from April 2016.
Annual Tax on Enveloped Dwellings (ATED)
The ATED was restricted to residential properties worth over £2 million when it was introduced on 1 April 2013. This is an annual charge on UK residential property held by non-natural person (e.g. a company and mixed or corporate partnerships). From 1 April 2015, the threshold value was lowered to £1 million and from 1 April 2016 it will be further lowered, applying to properties worth over £500,000 or more.
Replacement Furniture Relief (RFR)
The generous 10% wear and tear allowance for fully furnished properties is abolished from April 2016 and replaced by RFR. All landlords of residential property, regardless of the extent to which it is furnished will receive the RFR. The relief will be given for the like for like replacement cost of domestic items. From a tax planning prospective, it would be advisable to wait until the new rules apply on 6 April 2016 before you replace the furniture and thereby obtain 100% tax relief on the expenditure.
From April 2017, higher rate relief is restricted to basic rate relief only (currently 20%) for buy to let landlords with residential properties and will be phased in from April 2017 with full impact in the 2020/21 tax year. For more information, see the previous article on this subject here.
If you would like to discuss any of the above please contact Shakeel Butt at shakeel.butt@wsm.co.uk
Shakeel trained and qualified with a Central London firm and is a fellow of the Chartered Association of Certified Accountants. Before joining WSM, Shakeel was a sole practitioner for over twelve years. He advises on a wide range of accountancy, taxation and business related issues and is also the resident property tax specialist. Shakeel is married with three children and over the years has completed various marathon walks for charity.
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