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UK Property Tax Rules that Could Change Under New Government

Published by Prerana
Posted Date: July 10, 2024 , Modified Date: July 10, 2024

After an extensive battle between the Conservatives and the Labour Party, Labour won the General Election, making Sir Keir Starmer the new Prime Minister and Rachel Reeves the new Chancellor of Exchequer. In her first major speech to the Treasury, Ms Reeves claimed the past 72 hours of working in the office has been like working under the worst circumstances since the Second World War. In her speech, she also announced changes that could affect the UK property market. The proposed changes could potentially change the SDLT rates, non-dom regime, investment in grey belt lands, and many more.

What Are the Key Changes for the UK Property Market?

Before the Election, the Labour Party pledged not to raise the tax rates of the main taxes, including the Income Tax, National Insurance Contributions (NICs), and VAT. Also, the party had announced major changes for the SDLT rate of non-residents, investing a sum of £855 million in the HMRC, closing the non-dom tax loopholes, and many more. After about 2 days in the parliament, Chancellor Rachel Reeves addressed the Treasury. She discussed the major plans her party will execute during their term to “get Britain building again.”

1. SDLT Rate Change

The Stamp Duty Land Tax (SDLT) surcharge for non-residents investing in residential properties is currently at 2%. However, the Labour government plans to increase the Stamp Duty Land Tax (SDLT) surcharge to 3%. This change will help to address the affordability crisis of the housing market and also generate additional revenue for the government. In addition, this revenue generated can be reinvested in public services and housing projects.

2. Non-Dom Tax Changes

Non-domiciled residents or non-doms are UK residents who have permanent homes outside the UK. Currently, non-doms enjoy a special tax scheme that helps them avoid paying tax in the UK on foreign income. The Labour government intends to abolish this scheme and replace it with a modern scheme for people in the UK for a short period of time. The Conservatives had already announced this plan in the Spring 2024 Budget, but they have not been legislated yet. So, the Labour plans to abolish non-doms once and for all during their term.

This change could help increase government revenue and promote fairness within the tax subsystem. Abolishing the non-dom regime helps to ensure that wealthy individuals contribute their fair share to the UK economy.

Property Tax Changes

3. Focusing on Grey Belt Land

Green Belt lands are areas of land protected from urban development. The concept of green belt land was first introduced in London in 1938 with the green belt protection bill being introduced to the parliament in December 2023. The Prime Minister, Keir Starmer, announced his plans to build on grey belt land in April 2024. Grey Belt lands refer to areas of green belt land which are less aesthetic or ugly.

The Green Belt land protection has been debated among experts. Some believe the lands must be protected, while some believe this concept harms the growth of the property sector. Starmer believes these five rules for building on the green belt land:

  • Going for inferior quality or ugly areas of the land
  • Using brownfield land
  • At least 50% of homes built on this land must be classified as affordable
  • Improving green lands with parks and woodlands
  • Boosting infrastructure as schools and General practitioners (GPs) surgeries

This initiative of building on grey belt land is expected to make a substantial impact, as it provides a balance between preserving green belt land and meeting the growing demand for the UK housing market.

4. Remove the Ban on Onshore Wind Farms

The Conservatives established a ban on onshore wind projects in 2015. Now, the Labour government plans to up-lift the ban in an effort to promote sustainable development. This change can potentially help the UK’s renewable energy goals, stimulate economic growth in rural areas, and create job opportunities. The onshore wind projects can also reduce carbon emissions and contribute to climate change mitigation efforts. In addition, it could provide local communities with new opportunities for revenue generation.

Other Changes Affecting the Housing Market?

Other than these proposed changes, the Labour government has announced major plans to build 1.5 million new properties by the end of their term. The Chancellor went on to say in her speech, “After 14 years, Britain has a stable government – a government that respects business, wants to partner with business and is open for business.” She pitched this speech to business leaders and investors who have avoided the UK in recent years.

Here are some additional plans she announced for the UK property market:

  • The government will focus on the construction of 14,000 stalled homes. The stalled properties are present in Liverpool Central Docks, Worcester Parkway, Northstowe, and Langley Sutton Coalfield.
  • A possible reversal of Conservative policies and a new National Planning Policy Framework (NPPF). The framework established policies for the UK property and housing market and sustainable development.
  • Focus on and prioritise infrastructure projects that have been sitting unresolved for way too long.
  • Plan for major infrastructure projects within the country nationally rather than locally. This will help projects to be tied up for far too long.
  • Mark Carney, the former governor of the Bank of England, has produced a new National Wealth Fund, which the party will announce soon.

These changes will possibly help the property market with its affordability and housing crisis. In turn, it could also help the government generate more revenue, which is a dire need right now.

Conclusion

The new Labour government, led by Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves, is planning to make changes to the property market. These changes include increasing the SDLT surcharge for non-UK residents, getting rid of the non-dom status, focusing on developing grey belt land and allowing onshore wind farms. The goal is to make housing more affordable, encourage sustainable development, and increase tax revenues. These changes could have an enormous impact on property investors and the housing market in the UK.

Prerana
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