Is it time to reform the property tax regime?
13 / 02 / 2017
Although 2016 delivered a number of political surprises, the UK economy has shown tremendous resilience. However, the one issue that continues to exert influence on the property market is property taxes.
During his time as Chancellor, George Osborne engineered a series of property tax reforms. These reforms included the removal of the slab system, so that stamp duty is now paid on the amount above certain thresholds, rather than one rate on the total amount; changes to restrict the relief on finance costs to which individual landlords of residential property are entitled; and the introduction of the 3% surcharge for those purchasing second homes.
Whilst the change to the slab system, which also resulted in a higher SDLT liability for people purchasing property for over £1m, originally played into Mr Osborne’s narrative that ‘those with the biggest shoulders should bear the heaviest load’, they have since been viewed by some as an assault on purchasers of prime residential property.
Cuts to finance relief for landlords has led to a decline in the number of landlords buying investment properties and it has been suggested that the changes may result in increased rents for tenants.
The introduction of the 3% surcharge for people buying second homes has made buying an investment or an additional property more expensive, and could exacerbate the housing crisis.
Many commentators were hopeful that the current Chancellor, Philip Hammond, would use the Autumn Statement to reverse some, or all, of Mr Osborne’s reforms but any such change failed to materialise. There is now a growing chorus of voices calling on Mr Hammond to take action in this year’s Budget.
Whether Mr Hammond will accede to such demands remains to be seen. What is clear, however, is that prudent purchasers and landlords should seek professional advice to assess the implications of the current tax regime on their portfolio and consider any action they may wish to take without delay.
This article was first published in February 2017 edition of the leading lifestyle magazine, The Resident London.