Autumn Statement 2016: Property Tax
Today’s Autumn Statement focused on encouraging investment and improving productivity, while emphasising that the whole of the UK will benefit from the measures announced. Investment in infrastructure will both facilitate the building of new homes and drive economic growth outside of the South East. Perhaps surprisingly, there was no mention of any relaxation to SDLT, which many parts of the property sector have been campaigning for.
We are promised a Housing White Paper shortly which will set out a comprehensive package of reform to increase housing supply. The key headlines announced today included a Housing Infrastructure Fund of £2.3bn to provide infrastructure required to unlock new private house building in areas where housing need is greatest; a relaxation in the restrictions on grant funding to allow providers of affordable homes to deliver a mix of homes for rent and low cost ownership, and funding to facilitate the accelerated construction of homes on public sector land.
SME house builders are helped by the extension of the Builders Finance Fund to 2020-21 and a reduction by half of the planning guarantee for minor developments.
KS Comment: House builders will welcome these further commitments to the sector, and funding to assist in meeting the ambitious targets being set by government.
Letting agents are to be banned from charging tenants “letting fees” – we are promised consultation before legislation is bought forward.
KS Comment: A relatively minor change which could have a significant impact for some letting agents. Those affected need to look at their contracts with landlords to ensure that they comply with the new legislation when introduced. Any increase in costs incurred by landlords may well be passed on to tenants through the monthly rent charged at the same time as an expected increase in rents to compensate landlords for lost tax relief on mortgage interest, so this will contribute to rent inflation.
In his speech the Chancellor highlighted that the Treasury has identified a drop in tax revenues as a result of the incorporation of businesses. He has, therefore, announced that he will open a consultation on the matter next year.
KS Comment: Many buy to let landlords have considered incorporation in response to the restrictions being bought in on the tax relief on interest paid by landlords who hold their properties personally. Whilst we do not believe the proposed consultation is specifically targeted at the property industry, landlords may wish to assess the consultation document’s contents before incorporating their letting businesses.
Annual Tax on Enveloped Dwellings (ATED)
It has been announced that the yearly ATED charge imposed on companies holding UK residential property will be increased in line with inflation.
KS comment: Not unexpected, but shows that this tax is here to stay although the very large increase in the rate of this tax in 2015/16 looks unlikely to be repeated in the short-term at least.