Autumn Statement’s Land and Building Transaction Tax: How the changes will affect you

Stamp Duty Land Tax
Stamp Duty Land Tax (SDLT) is paid by purchasers of land and buildings. The tax is regarded as unfair, as it is imposed in a slab system on the whole value of the property according to the highest rate applicable for the property value.

From 4 December 2014 the new rates and bands of SDLT apply (see below) and the tax is imposed in a progressive fashion such that each slice of the property value bears tax at the rate according to that band, like income tax. These changes only apply for residential properties, not for commercial properties.

Until 3 December 2014 a house which sold for £260,000 would attract SDLT at 3% on the entire value, so the purchaser would pay £7,800 (£260,000 x 3%), although SDLT for properties costing up to £250,000 was just 1%.

Where the contract for the same house at the same price completes on or after 4 December 2014 the SDLT will be calculated as:

£250,000 – £125,000 x 2% £2,500
£260,000 – £250,000 x 5% £ 500
Total =   £3,000

This saves the purchaser £4,800.

Buyers who have already exchanged contracts to purchase, but have not completed the transaction before 4 December 2014 will pay SDLT at the new rates and bands which are:

Purchase price Rate of SDLT on each band
£0 – £125,000 0%
£125,001 to £250,000 2%
£250,001 to £925,000 5%
£925,001 to £1,500,000 10%
Over £1,500,001 12%

The changes for SDLT will mean that purchasers of residential properties costing less than £937,500 will pay less tax, but purchasers of properties over that threshold will pay more tax, and for purchasers of properties costing over £2.1 million will pay considerably more.

Land and Building Transaction Tax
From 1 April 2015 purchasers of land or buildings in Scotland will pay Land and Building Transaction Tax (LBTT) in place of SDLT. This new Scottish tax will be imposed in a progressive fashion, like the new SDLT. However, the new progressive LBTT will apply to both residential and commercial properties at the following rates and bands:

Residential Properties

Purchase price LBTT rate
Up to £135,000 0%
£135,001 to £250,000 2%
£250,001 to £1m 10%
Above £1m 12%

Non-residential Properties

Purchase price LBTT rate
Up to £150,000 0%
£150,001 to £350,000 3%
Above £350,000 12%

Annual Tax on Enveloped Dwellings
The annual tax on enveloped dwellings (ATED) is paid by the owners of residential properties (dwellings), where the property is held by a non-natural person such as a company, partnership with one or more corporate members, unit trust or similar structure. A number of reliefs and exemptions are available which must be claimed on a property by property basis for dwellings that are commercially let, held as stock for development companies, used as employee accommodation or as farmhouses, or are open to the public.

This tax was introduced in April 2013 and has raised five times more than expected, so the Chancellor is putting up the annual charges to apply in 2015/16 as follows:

Property value 2014/15 2015/16
Up to £1,000,000 £Nil £Nil
£1,000,001 to £2,000,000 £Nil £7,000
£2,000,001 to £5,000,000 £15,400 £23,350
£5,000,001 to £10,000,00 £35,900 £54,450
£10,000,001 to £20,000,000 £71,850 £109,050
Over £20,000,000 £143,750 £218,200

Business Rates
The Chancellor has ordered a full review of the future structure of business rates to report by Budget 2016. In the meantime the high level of small business rates relief (SBRR) will be extended to 31 March 2016, and the increase in business rates for that year will be capped at 2%.

High street shops, pubs, restaurants and cafes with a rateable value of less than £50,000 currently qualify for a discount on business rates of £1,000 per year. This discount will be increased to £1,500 per year for 2015/16.

If you have any questions please dont hesitate to email me at info@oneaccounting.co.uk for more information

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