All things are relative and there was a time when the property tax rules in the UK , as they applied to individuals, were relatively straightforward. Since April 2013, each new tax year has brought with it at least one change to those tax rules. By the time we reach April 2020, this part of the UK tax system will have changed out of all recognition.
Some of those changes are a direct consequence of the devolution of taxing powers. As a result, while some of the tax changes introduced in England and Northern Ireland also apply in Scotland and Wales, others do not. Starting with Scotland’s land and buildings transaction tax (LBTT) in April 2015, Scotland and Wales are now developing some of their own rules for taxing property.
Over the last seven years, the most significant changes are:
- April 2013 – introduction of the annual tax on enveloped dwellings
- April 2014 – final exempt period of ownership prior to disposal for capital gains tax (CGT) main residence relief reduced from 36 months to 18 months
- April 2015 – non-residents (individuals and companies) pay CGT on disposals of UK residential property within 30 days
- April 2015 – LBTT replaced UK stamp duty land tax (SDLT) in Scotland
- April 2016 – 3 per cent SDLT and LBTT surcharge on acquisition of buy-to-let residential property or second homes
- April 2016 – wear and tear allowance abolished on furnished lettings
- April 2017 – phased removal, over four years, of tax relief on interest to a flat-rate 20 per cent tax reduction
- April 2018 – land transaction tax (LTT) replaced SDLT in Wales
- January 2019 – LBTT surcharge (additional dwelling supplement) increased to 4 per cent
- April 2019 – non-residents pay corporation tax on gains arising on disposals of all immovable property, both residential and commercial
- April 2020 – non-resident corporate landlords of UK property pay corporation tax (previously income tax) on income
- April 2020 – UK resident individuals pay CGT on all UK residential property gains within 30 days
- April 2020 – final exempt period of ownership prior to disposal for CGT main residence relief reduced from 18 months to 9 months
- April 2020 – CGT lettings relief restricted to those living alongside their tenants only
Any resemblance to a maze is purely coincidental but, taken together, these changes include many traps for the unwary. Some of those traps are purely financial, for example requiring CGT to be paid within 30 days. Others such as maintaining an entitlement to CGT lettings relief may necessitate changes to practical domestic arrangements.
We’ve prepared a helpful guide to all these changes. If you’d like a copy, it can be downloaded here.