HOW WILL UK BUDGET 2012 IMPACT OVERSEAS INVESTORS

22 March 2012

Following the latest UK Budget announcements, our analysts have reviewed the changes that affect property, and we have provided comments on how each change could impact non-UK based investors:

INCOME TAX

  • On 6th April 2012 the standard personal allowance will rise from £7,475 to £8,105
  • From 6th April 2013 this will increase further to £9,205
  • There will be savings for higher rate taxpayers with incomes of less than £100,000 although this will be modest due to restrictions in the basic rate band. Individuals with income above this will continue to have their allowances withdrawn at a rate £1 for every £2 of income


The increase to the personal allowance is good news for landlords. If you leverage your investments you will now be able to keep an even larger proportion of your rental income tax free. 
  

STAMP DUTY

  • New Stamp Duty Land Tax (SLDT) rate of 7% charged on residential properties acquired for more than £2 million. This measure starts on 22/03/12
  • New Stamp Duty Land Tax (SLDT) rate of 15% charged on residential properties worth more than £2 million if bought through a company. This measure is effective from 21/03/12
  • There will be a consultation this year followed by implementation in April 2013 on the proposed annual, value based levy for residential properties valued at over £2 million that are already held by companies
  • There are no changes for stamp duty payable on commercial property transactions

     
The new stamp duty rates will only impact a very small percentage of residential property transactions. In November 2011 just 0.2% of properties transacted in the UK would have fallen above this new stamp duty threshold. Investors already owning, or planning to buy property valued at more than £2 million should review the ownership structure of their property holdings with their tax advisors.
 
    

CAPITAL GAINS TAX

  • From 6th April 2013 the government is proposing to introduce a capital gains tax charge on residential properties sold by non-UK companies (this does not include non-UK individuals). There will be a consultation on this later this year alongside the consultation on the proposed annual SLDT charge on certain residential properties already held in structures like this.
INVESTORS OWNING PROPERTY HELD BY NON-UK COMPANIES SHOULD CONSIDER REVIEWING THEIR OWNERSHIP STRUCTURES WITH THEIR TAX ADVISORS.

Source: Deloitte & PWC  

IP Global

Written by IP Global

IP Global’s full-service approach is built on extensive market research and analysis combined with a significant financial commitment to every investment we offer. We are able to manage the entire investment process end-to-end, from sourcing, financing, and management to those all important exit strategies, making investment in real estate as straightforward as investing in more traditional asset classes. Our expertise, experience and strong record have produced over USD2.8 billion in international real estate investments in over 30 markets worldwide.

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