Over the past twelve months whilst property transactions have remained largely flat, the Treasury has managed to gain an extra £2bn in tax due to the new 3% increase in stamp duty land tax (SDLT) on additional residential properties.
HMRC statistics to 31 July 2017 show that the number of property transactions is now c. 1,204,000, broadly the same as the year to 31 July 2015. However SDLT receipts have increased by 20% in the same period, up from £10.4bn to £12.4bn.
Given the stagnation in markets across the South East it is unlikely that this increase is solely related to general property price increases. More likely is the amount of purchases impacted by the changes introduced from 1 April 2016, which added an extra 3% SDLT for purchases of additional residential properties.
The introduction of this additional levy was reportedly to realign the residential property market, making it fairer for first time buyers. It is becoming clearer, however, that as prices continue to rise the measure has succeeded only in generating extra tax for HMRC and dampening an already sluggish property market, evidenced by the falling number of property transactions.
Alongside SDLT reforms, private landlords have suffered a host of taxation reforms. Income tax data in this area show total receipts up 5.42% on the previous 12 months, some 2.82% above inflation, with this majority of this originating from self-assessment income.
If you are looking to build or grow a portfolio of investment properties it is essential you structure it correctly from the outset to avoid costly tax triggers and burdensome income tax labilities later.
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