Budget 2016: CGT and SDLT

The Chancellor announced changes to Capital Gains Tax and Stamp Duty Land Tax which will affect property investors.

From 06 April 2016 the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%. Residential property investments are exempted and gains on the sale of second homes and buy to let properties will be charged an additional 8% surcharge which, in effect, preserves taxation rates at 28% and 18% respectively.

Primary residences continue to be exempt from this Capital Gains Tax by virtue of the Principal Private Residence Relief.

The news may be of interest to some property investors who hold residential properties in companies with an intention to retire or dispose of their interest in residential property in the future. By disposing of the share capital in the company this leaves the investor avoiding the 8% surcharge of Capital Gains Tax.

Stamp Duty Land Tax on commercial property transactions has now been altered to be more consistent with the residential scale. Small to medium property investors will welcome the change resulting in a saving in Stamp Duty Land Tax on properties acquired with a value of up to £1.05m. The new rates and tax bands will be as follows:-

1. 0% for the portion of the transaction value up to £150,000;
2. 2% between £150,001 and £250,000;
3. 5% above £250,000.

Stamp Duty rates for leasehold rent transactions will also change with a new 2% Stamp Duty rate on leases with a net present value over £5,000,000. These transactions are already taxed on a sliced basis. All leasehold rent transactions up to £5,000,000 will remain unaffected.

The proposed changes will affect investors intending to purchase property; tenants proposing to take leases as well as investors intending to dispose of commercial property. The real estate team at Fraser Dawbarns LLP in Cambridgeshire and Norfolk is able to assist with any enquiries you may have in respect of the above changes and how they are likely to affect property deals.