Ben is on holiday this week so landlord tax specialist Steve Sims is filling in with a post on the Chancellors Autumn Statement. Steve will be starting his own regular column in the new year.
Steve Sims Tax Column
Accidental landlords and property investors from overseas are likely to be the big losers in Chancellor George Osborne’s autumn statement.
Accidental landlords have their time limit slashed in half before they qualify paying capital gains tax (CGT) on a property sale or disposal.
Private residence relief currently offers a 36-month window of tax opportunity for anyone renting out a house that has previously been their main residence – from April 6, 2014; this will be capped at just 18 months.
British expats who have moved to a place in the sun but rented out their home or have buy to let investments will also have to pay more tax under the Chancellor’s new CGT regime.
From April 6, 2015, any non-resident will pay CGT on the sale or disposal of all or part of a property in the UK.
Current CGT rules mean they are exempt from the tax, so anyone with a buy to let portfolio emigrating overseas could sell their investments after leaving and pay no tax.
“This is one personal tax change we make which is not about avoidance, but is about fairness,” Osborne told MPs during his statement in the House of Commons.
“Britain is an open country that welcomes investment from all over the world, including investment in our residential property.
“But it’s not right that those who live in this country pay capital gains tax when they sell a home that is not their primary residence – while those who don’t live here do not. That is unfair.”
Another tax shock on the way from non-residents is they will probably have to pay more CGT than their counterparts in the UK.
Osborne has indicated he wants to consult on how to work the rules, but is considering a flat rate of 20% CGT for non-residents.
Resident basic rate taxpayers have an 18% rate, while higher rate (40%) and additional rate (45%) taxpayers are charged at 28%.
Expats also lose the annual exempt amount – a personal CGT allowance which is deducted from any chargeable gain that stands at £10,900 for the current tax year (2013-14). Paying the tax on the exempt amount at 20% adds £2,180 to a CGT bill for a non-resident.
Osborne did not reveal any other tax major personal tax changes, making clear any giveaways could only come from cuts elsewhere.