Private Client: Autumn Budget review
On 22 November the Chancellor of Exchequer, Philip Hammond introduced to Parliament his Autumn Budget. This time, there are no significant changes in the Private Client sector; although, yet again there is a promise of putting the Inheritance Tax rules under review.
Perhaps the most significant change is the headline-snatching announcement of abolishing Stamp Duty Land Tax (SDLT) for first-time buyers on purchases of properties for up to £300,000 or on the first £300,000 of properties valued up to £500,000. Any property priced above £500,000 will not be able to benefit from the relief and the old rules will still apply even if the property is purchased by a first time buyer.
For example, prior to the announcement, a first-time buyer of a property worth £500,000 would pay SDLT of £15,000 – first £125,000 at 0%, £125,000-250,000 at 2% (£2,500) and the remaining £250,000 at 5% (£12,500). The new measure reduces this amount to £10,000 – the first £300,000 at 0% and the remaining £200,000 at 5% (£10,000). According to the experts, on average, first-time buyers will be saving £1,660.
Nevertheless, this measure is not appreciated by everyone. According to the forecast by the Office for Budget Responsibility, the changes to SDLT rules will cause house prices to increase significantly, making it even more difficult for first-time buyers to get on the property ladder in the future.
The Autumn Budget may also be unwelcomed by second homeowners, who already pay SDLT at higher rates. Phillip Hammond’s announcement includes a new power for local authorities to charge a premium on normal council tax rates of up to 100% on unoccupied properties. It is difficult to predict if this move will push those affected into renting or indeed selling their second homes.
The Chancellor also plans to burden property investors from overseas with potential Capital Gains Tax charge on disposals of UK commercial property. Currently only the disposal of residential properties by overseas owners gives rise to a potential CGT charge.
We have yet to see how the new measures will affect the market and property owners in the long run. Nevertheless, if you think that these changes may affect you, you should take professional advice as soon as possible.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.