No tax break for landlords in Budget 2014 

The Chancellor’s 2014 delivered this week contained little in the way of good news for landlords or property investors.

An expected big announcement was how the government intends to tax capital gains for non-residents who directly own UK residential  property.  Currently a UK capital gain is not-taxable for a non-resident, but the government have previously announced an intention to change this from April 2015 – however, no news was forthcoming and none of the documents published with the Budget made any mention of the upcoming changes, so non-resident property owners and their advisers are none the wiser.

Unexpectedly, the special rules on "expensive" residential properties applying to properties valued at over £2m are to be extended downwards to properties valued at over £500,000.

And so

  • from Budget Day, "non-natural persons" (usually companies) buying such properties will be charged Stamp Duty Land Tax at the punitive rate of 15%;
  • from April 2015 the Annual Tax on Enveloped Dwellings ("ATED") will be extended to £1m+ properties (with ATED set at £7,000);
  • from April 2016 ATED will be extended to £500,000+ properties (with ATED set at £3,500).

‘’Many of these are empty properties held in corporate envelopes to avoid stamp duty,” said the Chancellor.  There does now seem to be a definite adverse wind of change as regards holding residential bricks and mortar inside companies – and I think we can expect further changes.  However at lease on the plus side the timing of the changes allows those who may be affected to restructure their affairs.

The type and level of expenditure that qualifies for Business Premises Renovation Allowance (BPRA) has been restricted so that only the direct costs of converting or renovating unused business premises may be relieved. Qualifying buildings must also be unused for a year before renovation, and there are also restriction when work is paid for in advance.  These measures should not really affect genuine claims.

Another point of interest for most landlords however was the change in income tax. The personal allowance will rise to £10,500 from April 2015, saving most taxpayers around £800 a year. The Chancellor has also listened to tax advisers and think-tanks and pushed up the higher rate tax threshold somewhat to remove some middle-earners from the 40% rate.

Finally, for landlords with tax arrears the Chancellor has announced plans to introduce powers that will enable HMRC to recover tax debts directly from bank accounts and ISAs – a bit scary that.