The UK property Taxes have gone through several changes in past years affecting both UK residents and non-residents. These changes had a crucial impact on the UK property market specifically in terms of property investment.
Stamp Duty Land Tax (SDLT):
One of the most important changes to the UK property tax system was the charge of the Stamp Duty Tax (SDLT) surcharge in the year 2021. This surcharge specifically applies to the buyers of residential property in England and Northern Ireland for individuals who are non-residents of the UK. There is an extra 2% charge that is put in on nonresident transactions even if you intend to live in the property you are buying.
In London where many foreign investors buy property this tax has a significant impact on the UK property market, making it more expensive for nonresidents to buy property in the country.
Council Tax:
Council tax is the annual tax on residential property in the UK. This tax is based on the banking system that uses house values. However, the Organization of Economic Cooperation and Development (OECD) has put criticism on the UK property taxes by stating that this tax is outdated and favours the elite.
Capital Gains Tax (CGT):
Capital gain tax is a tax on profit, when you sell or dispose of an asset that has increased in value. CGT is payable on the sale of residential property in the UK except for your main residence.
In the year 2022, the UK government announced changes to the CGT system, which came into charge on April 2023. These changes cause the introduction of a single rate of CGT, which will be set at 20%. This makes it easier for the taxpayers to understand their liabilities and step in the right direction toward simplifying the property taxes UK.
Inheritance Tax (IHT):
Inheritance Tax (IHT) is a tax that implies the property of a deceased person and is payable on the property which is worth over 325,000 in the UK. The rate of IHT is 40% currently.
Recently there have been no changes to the IHT system in the UK, but the government has announced to review of the IHT system with the idea of making it easier for taxpayers to understand their liabilities.
The Impact of Recent Changes:
The recent changes in the property taxes UK have had an impact on the UK property market. The SDL taxes have made it more expensive for nonresidents to purchase any property in the UK which has led to a decrease in demand for properties in the country. CGT system changes will simplify and make it easier for taxpayers to understand their liabilities. However, the CGT changes also cause an increase in CGT liabilities for some taxpayers. The OECD has criticized UK property taxes and the whole system by stating that it favours elites.
Conclusion:
To sum up, some taxes made it more expensive in the UK for nonresidents to purchase property in the country which caused a decrease in demand for high-end properties. All the changes in the property taxes UK have had a significant impact on the UK property market.
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