2016 April | Exchange Accountancy Services - Part 2

Archive for April, 2016

Stamp Duty increases buy-to-let

Thursday, April 7th, 2016

From 1 April 2016, individuals who purchase additional residential properties, second homes or buy-to-let properties will pay an additional 3 percentage points above the existing SDLT rates. The higher rates are:

  • £0 – £125k: 3%
  • £125k – £250K: 5%
  • £250k – £925k: 8%
  • £925k – £1.5m: 13%
  • Over £1.5m: 15%

This will add a considerable on-cost for landlords and families that venture into multiple property acquisitions. Without this change, a residential property purchased for £250k would have had a SDLT charge of £2,500. Under the new rates this will increase to £10,000.

Properties purchased for under £40,000, caravans, mobile homes and houseboats will be excluded from the higher rates. Furthermore, small shares in recently inherited properties will not be considered when determining if the higher rates apply.

 The budget also clarifies when companies making residential property purchases will be subject to this additional SDLT charge.

 In the lead up to the budget it had been speculated that significant, incorporated property businesses would be able to avoid the increase. It would appear that this is not to be.

 In the notes to the budget it is clearly stated:

 “Companies purchasing residential property will be subject to the higher rates, including the first purchase of a residential property.”

 Accordingly, setting up a new company for each property acquisition or transferring existing portfolios into corporate structures will not allow landlords to avoid the additional rates of SDLT on post April 2016 acquisitions.

 Indirectly, these changes will also affect sellers of residential property as the SDLT increases may dissuade marginal buyers from purchasing. Will we see affected house prices falling?

Capital gains tax changes April 2016

Thursday, April 7th, 2016

 One of the surprising announcements in the recent budget was the easing of capital gains tax (CGT) rates.

 From April 2016, the new rates published by HMRC are:

 Changes to rates.

 Legislation will be introduced in Finance Bill 2016 to reduce the rate of CGT charged on most gains accruing to basic rate taxpayers from 18% to 10%.

 For higher rate taxpayers, or those whose gains exceed the unused part of their basic rate tax band, the rate of CGT charged on most gains will be reduced from 28% to 20%.

 The 28% and 18% rates will continue to apply for gains accruing on the disposal of interests in residential properties that do not qualify for Private Residence Relief, and the receipt of carried interest.

 The rate of CGT charged on Annual Tax on Enveloped Dwellings related chargeable gains will continue to be 28%. These changes will have effect from 6 April 2016.

The annual exemption for CGT continues to be £11,100. This is the amount of gains an individual can make and still pay no CGT. Married couples both qualify for the annual exemption.

The lower 10% rate will apply to gains, that when added to your taxable income, still fall within the basic rate band. Once the basic rate band is exceeded any gains that fall into the higher rate band will be taxed at the higher 20% rate.

The 18% and 28% higher rates will continue to be applied to gains on the disposal of residential property that do not qualify as a principal private residence.

Business tax breaks from April 2016

Tuesday, April 5th, 2016

 The government have published a list of changes in the impact of taxation, rates and NIC that will apply from April 2016. The list is reproduced below:

Businesses will benefit from:

  • lower business rates bills as the doubled Small Business Relief Scheme is extended for another year. This £730 million boost will see over 400,000 businesses save an average of £890, with some businesses saving up to £1,450. These changes come ahead of the cuts to business rates in 2017, when 600,000 small businesses – a third of all businesses in the UK – will be taken out of paying business rates altogether.
  • fuel duty freeze. Now in its sixth successive year, the freeze means a van driver is spending £30 less on each tank of fuel and the average haulier £150 less per tank, in comparison to what they paid in 2011
  • new corporation tax relief for orchestras. Building on the successes of our current Creative Sector Tax Reliefs, the UK’s range of exciting and world famous orchestras will now be able to claim 25% relief on eligible expenditure, helping them to continue providing enrichment and education to people across the country. In addition to these changes, from Wednesday 6 April:
  • millions of businesses will no longer have to pay employer National Insurance contributions (NICs) as we:

    • abolish employer NICs for apprentices aged under 25 giving a business employing an apprentice earning £16,000 a year an annual saving of over £1000
    • increase the employment allowance, which reduces the employers NICs for all businesses and charities, from £2000 to £3000, helping 500,000 employer hire regular staff. This will take around 90,000 employers out of employer NICs altogether and will mean a firm can employ up to 4 people on the new National Living Wage and pay no employer NICs at all
  • business will benefit from additional investment expected following a cut in Capital Gains Tax (excluding carried interest and gains on residential property). It will ensure that companies have the opportunity to access the capital they need to grow and create jobs

Additional tax changes on 6th April:

  • farmers averaging scheme will be extended to include an option to average over 5 years as well as 2 years
  • annual amount of donations on which charities can receive a 25% government top-up through the Gift Aid Small Donations Scheme will increase from £5,000 to £8,000. This means that each charity will be able to claim up to £2,000 of government support per year.