Calling All Property Investors: Peek Inside the New Budget

Can the new government get the UK economy back on track? That’s the question on everyone’s minds right now – a question that will hopefully be answered by this administration’s first budget. And property investors, landlords and real estate professionals are waiting with bated breath to see what policies, updates and changes their sector will be greeted by.

When Will the Government Present Its First Budget?

Before the election, Labour had promised to present the budget every year within the last two weeks of November. However, due to the timing of the last general election that brought them to power, an autumn budget does not look likely now. In fact, the first fiscal event is anticipated to be published earlier now.

In their manifesto, the present government stated that they would base their fiscal events on independent forecasts provided by the Office of Budget Responsibility (OBR). So, considering the time for Parliament’s summer recess and the OBR reviews, mid-September appears to be the earliest feasible date for the new government to deliver its first budget. This early announcement of the budget will provide much-needed clarity on the property tax policies.

Potential Reforms in the Property Tax Market

The government has major plans to make the property and tax market fairer and generate additional revenue. Chancellor of the Exchequer Rachel Reeves, in her first major speech to the Treasury, discussed her plans to enhance the property market and “get Britain building again.” Here are the key changes in the property tax industry:

• SDLT Rate Increase – The Stamp Duty Land Tax (SDLT) surcharge for non-residents is to be increased by 1%. Currently at a rate of 2%, now after the change, non-residents wanting to invest in the property market of the country will pay a 3% SDLT surcharge.
• Tax on Carried Interest – The carried interest is currently subject to a Capital Gains Tax rate of 28%. Now, there are plans to tax carried interest as income rather than CGT.

Property Tax Reforms for Landlords and Investors

The Labour government plans to build 1.5 million houses during their five years of term. This plan would significantly help the landlords and property investors of the country. Also, the government plans to focus on reconstruction work of 14,000 stalled properties across the UK. This reconstruction work provides the property market with new opportunities and potential buyers.

Another major plan of the government includes focusing on building properties in grey belt lands. Also, they plan to make at least 50% of the properties affordable, which could majorly help the property market.

Business Tax and Other Implications

The government plans to publish a roadmap for business taxation within the first six months. This will include trialling advance rulings and clearances for major investment projects. The roadmap will prove as a benefit for providing businesses with greater certainty.

Another major agenda is investing in HM Revenue and Customs (HMRC). The plan is to invest £855 million per year to increase the tax receipts by approximately £6 billion. This investment in the HMRC is on the agenda to close the tax gap of the government. Here is what the government’s plan for HMRC includes:

• Improvement in the customer service of HMRC so that taxpayers, agents, and individuals can better understand the policies and procedures
• Recruit more HMRC staff to focus on specific areas of tax risk
• Additional funding for important criminal cases
• Changes to the legislation to tackle non-compliance

Non-Dom Status

The non-dom status will be abolished under the new government and be replaced with a modern regime to tax foreign income and gains. This will significantly affect High Net Worth investors who are currently reaping the benefits from the non-dom status. The non-dom status is planned to be abolished from April 2025.

Conclusion

The government plans to reform property taxes to make them fairer and more efficient. This will affect property investors, landlords, and real estate professionals. It is important to stay informed about these changes and adjust tax planning strategies accordingly. Understanding the potential impact of the new tax policies will help stakeholders navigate the evolving landscape of UK property tax laws and make informed investment decisions. The property sector is ready to adapt to the forthcoming tax updates and implications as we await the first fiscal event.