3 things people overlook with property taxes

Property tax for sale

Despite the backdrop of economic uncertainty, HMRC is cutting little slack with businesses and individuals deemed to be in good financial health, i.e. business as usual when it comes to paying taxes.

There have been some changes to property taxation which are being overlooked by not only taxpayers but also some professionals and it’s worth a quick reminder of what these changes are and what you need to do about them.

SDLT relief for multiple dwellings

When carrying out SDLT reviews for some clients, we’ve picked up that they could have claimed multiple dwellings relief ‘MDR’ where more than one dwelling has been bought. MDR permits the purchase of two or more dwellings in the same transaction, based on an average price. There is a minimum rate of 1% which should be applied. MDR also applies to a single dwelling which has an annexe which is sufficient to be deemed a second dwelling.

When drafting property purchase contracts, it’s common for us to see the wrong rates applied to the wrong amounts, resulting in an overpayment of SDLT. We’ve been advising clients on how much tax relief they’re entitled to and helping them reclaim the overpayment.

CGT payable within a 30 day window & PPR reduction

From April 2020, UK residents disposing of second properties have been required to report the sale and pay any resulting Capital Gain Tax within 30 days of completion. Non-UK residents disposing of UK residential and non-residential property must report a disposal, even if no tax is due.

The issue many property sellers have is that they don’t have certainty about the amount of tax due because they don’t know what the other capital gains/losses will be for the tax year.

HMRC initially started applying late filing penalties from 1 July 2020 with underpayments of notional CGT attracting interest charges.

HMRC has set up a new digital service and individuals should set up an account to report CGT on UK property.

PPR changes from April 2020 – The PPR final period exemption window was reduced from 18 months to 9 months and from that date, no lettings relief is available unless in a shared occupancy.

If you’re selling a second property or are non-UK resident making UK property sales, we can advise you on your tax position and ensure you pay and file on time to avoid incurring interest and penalties.

The temporary reduction of Stamp Duty Land Tax ends on 31 March 2021

Earlier this year Chancellor Rishi Sunak announced reduced rates of Stamp Duty Land Tax ‘SDLT’ for UK residential properties bought between 8 July 2020 & 31 March 2021.

During this period, SDLT of 0% is applied property transactions up to £500,000. From April ’21, the 0% relief only applies to sales of property up to £125,000, then 2% on sales up to £250,000 and 5% on sales up to £925,000.

How we can help you

Property tax changes quickly and we can advise you of how the latest developments affect you. Please contact Julia Gallagher who can help with your property tax issues. 01527 558539.