How the Budget 2016 affects Bournemouth Landlords

Stamp Duty 3% surcharge, Insurance Premium Tax increase, Income Tax Changes. Just another budget right? But how is this going to affect YOU - The property owners and investors of Bournemouth?

Hello everyone! My regular blog followers will notice this week’s article has been posted up quite late. It’s been a very busy month, and I wanted to write a special article following George Osbourne’s 2016 budget announcement. There are a number of huge announcements that will affect Bournemouth landlords that have been announced, from Stamp Duty changes to Income Tax changes, so I hope you find this article helpful.

Stamp Duty on commercial property transactions and the 3% surcharge on additional properties

The stamp duty land tax (SDLT) charged on purchases of non-residential properties and transactions involving a mixture of residential and non-residential properties is to change for transactions on or after 17 March 2016. Thereafter SDLT will be charged at each rate on the portion of the purchase price which falls within each rate band. The new rates and thresholds are as follows: 

Transaction value band	Rate
£0-£150,000	0%
£150,001 - £250,000	2%
£250,001 +	5%

Higher rates of SDLT will be charged on purchases of additional residential properties, such as second homes and buy-to-let properties. The higher rates will be 3 percentage points above the current SDLT rates: 

Thresholds	Ex. SDLT rates	New ad. property SDLT rates
£0-£125,000	0%	3%
£125,001-£250,000	2%	5%
£250,001-£925,000	5%	8%
£925,001-£1,500,000	10%	13%
Over £1,500,000	12%	15%

The announcement also provides arrangements where there is a period of overlap or a gap in ownership of a main residence. Companies purchasing residential property will be subject to the higher rates, including the first purchase of a residential property. Properties purchased for under £40,000, caravans, mobile homes and houseboats will be excluded from the higher rates.

Capital Gains Tax Reduced 

The CGT had been reduced from 28% to 20% for higher rate tax payers and from 18% to 10% for low rate tax payers from April 2016. However there will be an 8% surcharge on residential property leaving Landlords selling at the same old rate!

Income tax allowance threshold 

The personal allowance will be increased from £11,000 in 2016/17 to £11,500 in 2017/18..

The higher rate threshold will increase from £32,000 in 2016/17 to £33,500 in 2017/18. Individuals entitled to a full personal allowance will not be liable to higher rate tax until their total income exceeds £43,000 in 2016/17 and £45,000 in 2017/18. The NICs upper earnings limit will also increase to remain in line with the higher rate threshold.

Corporation tax 

The rate of corporation tax will reduce to 17% for the financial year commencing 1 April 2020. The planned reduction in corporation tax to 19% from 1 April 2017 remains unchanged.

Insurance premium Tax IPT 

The standard rate of insurance premium tax will increase from 9.5% to 10% with effect from 1 October 2016 and funds raised to be spent on UK flood defences (£700million).

Class 2 National Insurance 

For self employed Class 2 National Insurance contributions are to be scrapped and only Class 4 NIC will be payable.

Property Income Allowance

The government will introduce a new £1,000 allowance for property income and a new £1,000 allowance for trading income from April 2017. Individuals with less than £1,000 of either source of income will no longer need to declare or pay tax on that income. Those with income above £1,000 will be able to deduct their expenses in the usual manner or simply deduct the £1,000 allowance.

There’s a lot there to digest, and I’d recommend speaking to your accountant on the full affects of these changes. If you would like to talk about any of your properties, please do get in touch either call me on 07979123970, send me an email to luke.marchbanks@belvoir.co.uk or pop into the office for a coffee and chat. 

(Credit to D&T Accountants for providing much of the information above)