Coronavirus: Property tax update

The UK property market has been enjoying a mini boom since lockdown ended and pent up demand was released. And whilst the temporary Stamp Duty Land Tax (SDLT) holiday is benefiting many, there are other important tax considerations that buyers, sellers and investors should bear in mind.

Capital Gains Tax

The recent changes to Capital Gains Tax (CGT) reporting means that property sales falling within the regime need disclosing to H M Revenue and Customs within 30 days of completion, as well as the payment of tax. These transactions will include sales of second homes, buy-to-lets, and property owned by non-UK residents.

Furthermore, CGT on second properties can catch people out. For example, when gifting additional properties to children or grandchildren. It’s a complicated area and they often underestimate the amount of tax owed or they assume that it doesn’t apply.

Other potential pitfalls include the reduced nine-month period that homeowners have to sell their main residence before running into CGT issues and the restriction in lettings relief from April 2020. Problems can also arise with valuations used for probate purposes as these set the basis not only for inheritance tax (IHT), but also CGT.

Generally speaking, however straightforward you think your tax situation is, it’s always best to seek professional advice in advance and ensure you have the appropriate planning in place.

Stamp Duty Land Tax

From 8 July 2020, the nil rate band for SDLT was increased from £125,000 to £500,000 on sales of main residences in the UK and Ireland. This “holiday”, which was announced as part of the Summer Budget, is due to run until 31 March 2021.

For buyers of second properties however, the additional SDLT surcharges that apply when buying a second property is a potential pitfall. For example, there are many cash buyers who can purchase their next property without selling their main residence first, who will be liable for this additional tax. However, there is some good news here, as this surcharge is recoverable if buyers sell their original property within a certain timeframe.

Landlords and property investors

A lot of tenants have been struggling financially as a result of the pandemic and were unable to keep up with their rent payments, which has impacted commercial and residential lettings.

If landlords/investors haven’t done so already, it’s advisable to review your property portfolio; taking any tax that’s owing on your rental income into account, alongside any bad debts you’ve accumulated in recent months. In some instances, it may also be worth restructuring property portfolios to ensure they’re as tax efficient as possible.

Our expertise

We advise local buyers and sellers on a variety of property related tax matters; from one-off transactions to longer term planning for investors and second homeowners, and advice for developers on the best way to structure projects.

For further guidance on any property related tax matter, please contact Calvin Healy on 01225 325580, or email ch@richardsonswift.co.uk.

Please note that this is only a summary of the main issues and should not be construed as advice.