The changes to taxation of let property, announced in 2015, start to be phased in from April 2017. Tax relief for interest paid will be restricted to basic rate rather than the taxpayer’s marginal Income Tax rate, with potentially substantial disadvantages for landlords who have borrowed to buy their properties. For 2017/18, 25% of the interest will be relieved at basic rate; the remaining 75% will be deducted from income as in the past and relieved at marginal rate. By 2020/21, all the interest will be restricted to basic rate relief only.
Offshore property developers
The Finance Act 2016 made changes to charge UK Income Tax or Corporation Tax on all profits from developments of land in the UK, regardless of the residence status of the developer. The change took effect from 5 July 2016, but with a transitional exemption for transactions where a contract for disposal was entered into before that date. The Government has now realised that some development contracts are signed at a very early stage in the project, and has made an amendment to ensure that the transitional protection does not apply more widely than intended. All profits from dealing in or developing land in the UK, that are recognised in the developer’s accounts on or after 8 March 2017, will be subject to UK tax. This will be the case even if the contract for disposal was entered into prior to 5 July 2016.
A simplified ‘cash basis’ has been available to Income Tax traders for several years. For 2017/18 a variant of this will be extended to landlords subject to Income Tax as well. Entry to the cash basis will be permitted with turnover up to £150,000, which will also be the exit threshold.
Stamp Duty Land Tax
The Government consulted during 2016 on a proposal to reduce the filing and payment deadline for Stamp Duty Land Tax (SDLT) from 30 days after a transaction to 14 days. It has been decided to delay this until after April 2018. No other announcements were made about SDLT.