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New tax burden for UK homes owned by company or partnership
New tax rules which come into force next month in the UK could leave some home owners with a bill of £7,000 if their property is partly or wholly owned by a company or partnership. The 2014 budget reduced the threshold for dwellings that fall within the Annual Tax for Enveloped Buildings (ATED), what used to be called the Annual Residential Property Tax, from £2 million to £1 million. The threshold will come down again in 2016 to £500,000 bringing thousands more properties throughout the UK into the tax bracket and forcing owners to submit an ATED return. Sue Crossley, from The Country House Company in Hampshire, which handles the sale and letting of high quality rural properties throughout the south, said many owners were unaware of the new tax burden. ‘This is going to be a shock for a lot of people. This change was tucked away in the small print of the 2014 budget but now it is actually coming true for a lot of people,’ she explained. Most residential properties are owned directly by individuals, but in some cases they may be owned by a company or a partnership with a corporate member. Then the dwelling is said to be ‘enveloped’ because the ownership sits within a corporate wrapper or envelope. Crossley pointed out that there are reliefs that could reduce the tax completely but they can only be claimed when a tax return is completed and sent in. There are also exemptions for charitable companies using the dwelling for charitable purposes. The returns are due by 01 October 2015 and payment by 31 October 2015. From April 2016, properties valued at greater than £500,000 but not more than £1 million will have an annual charge of £3,500. ‘Many people living in properties worth £1m who run businesses and use their property as an investment vehicle will find they have an extra bill to pay this year. That will have a direct impact on a significant number of people this year but many thousands more people will be affected next year when the threshold comes down again to £500,000. There are millions of people living in houses worth more than that,’ said Crossley. ‘I can see why the government has made this change. They have seen people in business use their property as a shield from some of their tax burden and the Exchequer has been looking for a way to claw some of this back. But the bill will still come as a shock to many who may not have been expecting it or may not have budgeted for it,’ she added. Continue reading
Extent of UK mortgage market change shown in annual stats
Home lending fell to £51.3 billion in the final three months of 2014, a drop of 8.1% compared with the previous quarter but was just 0.2% lower than the same quarter in 2013, new data shows. The figures from the Bank of England also shows that new commitments also decreased, from £53.6 billion in the third quarter of 2014 to £46.3 billion in the fourth quarter, a decrease of 8% compared with the final quarter of 2013. The proportion of gross advances at fixed rates decreased for the first time in nine quarters falling to 82.2% in the fourth quarter from 82.6% in the previous quarter. The quarter three out turn was highest since the figures began at the beginning of 2007. The value of residential loans advanced to first time buyers decreased over the quarter to £11.2 billion from £12.1 billion in the previous quarter and the third quarter out turn was the highest since the third quarter of 2007. Buy to let (BTL) lending increased from £6.6 billion in the fourth quarter of 2013 to £7.6 billion in the fourth quarter of 2014 and the proportion of gross advances at an LTV over 90% decreased by 0.5% over the quarter to 3.8% in the fourth quarter of 2014. The figures show overall that the lending landscape has been extensively reshaped over the past year, according to Adrian Gill, director of Your Move and Reeds Rains estate agents. ‘Fresh regulations and affordability checks have cultivated a much healthier mortgage market. Mortgage approvals may take longer to come to fruition, but buyers are benefiting from a more thorough and considered borrowing process,’ he explained. He believes that in the longer term, providing customers with the most suitable mortgage product for their needs is of paramount importance at a time when front-end demand is beginning to blossom in 2015, as consumer confidence grows. ‘Slashed stamp duty fees and more gradual house price growth are bringing homeownership closer within reach of aspiring buyers, while at the same time rock bottom inflation and competitive mortgage deals are giving borrowers a boost,’ he pointed out. ‘Buyers are finding brilliant deals on homes, and this front-end sales activity will soon trickle down to completions, feeding the property recovery,’ he added. Continue reading
Sales transactions down while lettings thrive in prime London property market
Sales in London’s prime property market have continued to fall for the second month in a row in 2015, with transactions down 22% year on year. According to real estate firm W.A. Ellis, a JLL company, this comes on top of a 34% year on year fall in sales recorded in January. A breakdown of the figures shows that the most dramatic reduction is sales of houses within Belgravia, Chelsea, Knightsbridge and Kensington which have dropped by 100% from 40 sales in 2014 to 19 in the same period this year. ‘Whilst at first glance, these figures may sound alarming, it is always the same in the run up to an election, particularly when property and potential taxation surrounding it, has been at the forefront of all parties’ manifestos,’ said Richard Barber, director at W.A.Ellis. ‘That said, if one uses the same parameters, namely houses sold in the preceding postcodes in previous election years, 2010 and 2005, 47 and 38 houses were sold respectively. He pointed out that an interesting trend that the firm has observed recently is the off market sales sector. ‘With sentiment amongst domestic buyers so cautious, it is not surprising that vendors wish to keep their houses away from the internet, where its exposure and time on the market can so easily be measured,’ he said. ‘There have certainly been several off market sales recently, but these will not contradict the general downward trend in transaction levels,’ he explained, adding that while the top of the prime central London market may be undergoing a weaker period in the face of the election, London’s suburbs are still experiencing strong growth, fuelled in part by buy to let investors benefitting from a reduction in lenders stress testing. He explained that loans of up to 75% (LTV) can now be acquired and the stress test for rental income has in some cases been reduced from 125% to 110%. ‘This is good news for investors, however one must remember that the government, as of 06 April, will be clawing back greater Capital Gains Tax revenues from both foreign owners and corporate structures on all capital gains made after this date,’ said Barber. ‘whilst the outlook for the market over the next 64 days remains tentative, we are still registering strong international interest at the very upper end of the market which is indicative of London’s perception as the number one safe haven and front runner for long term capital growth over the next 10 years,’ he added. In the lettings sector Lucy Morton, director and head of agency at W.A.Ellis, said that the firm is seeing both savvy investors and a cautious buyers entering the lettings dynamics. ‘The savvy investor is looking to buy to let to increase their portfolio prior to the election foreseeing that there could well be a boom in the sales market once the uncertainty is over and a government in place… Continue reading
