A brief overview of Budget measures
IN THE summer Budget last month Chancellor George Osborne confirmed that tax relief for the highest-income private landlords would be reduced from the current 40% and restricted to the basic rate of tax (20%), a measure which will be phased in from 2017.
In addition, the wear and tear allowance previously automatically granted at 10% of the annual profit of a buy-to-let will now be allowed only on provable expenditure. Mr Osborne stated that from April 2016 the formal Wear and Tear Allowance which allows 10% of rental profits to be written off for notional wear and tear, even if there has been no such actual expenditure in that particular year will be replaced with a relief that enables all landlords to deduct the costs they actually incur on replacing furnishings in the property.
HMRC has now announced the scope of the changes in an 11-page consultation document.The old wear and tear tax break applied only to fully furnished properties, so agents and landlords will in future no longer need to decide whether their property is sufficiently furnished to claim the new replacement furniture relief. This is because the new relief will apply to all landlords of residential dwelling houses, no matter what the level of furnishing.
Resident landlords letting a room in their property under the ‘Rent A Room’ scheme will be able to benefit from a yearly tax relief which has been increased to £7,500 after being held for 18 years at £4,250 per annum.There will also be an increase in the inheritance tax threshold to £1m for married couples by 2017.
Council and housing association tenants in England who earn more than £30,000 or £40,000 in London will pay up to the market rent, the Help To Buy ISA is confirmed and the expansion of Right To Buy for housing associations is to be introduced.
‘Non-doms’ with residential property will pay the same tax as UK owners and the permanent non-dom tax status will be abolished (coming into effect in April 2017) – it is thought that this may have a major effect on high-end residential markets, especially in prime central London.
The government will also be looking to increase HMRC’s powers to pursue tax avoidance, including by overseasbased companies operating in the UK, as well as making planning reforms.
Contact Lakin & Co on 01895 544 555 for more information on the changes and to see how they can assist you with your property and your tax affairs.