Potts & Co - Accountancy & Business Advice

Gains From Off-Plan Purchases

By | Capital Gains Tax, Potts & Co Accountancy & Business Advice News, Property

Most people understand that when you sell your main home the profit you make on the sale is exempt from tax. However, for this exemption to apply in full you must generally occupy the residence throughout your period of ownership.

If the property has been acquired before it is fully constructed, the ownership condition will be met for the period before it is inhabited but the occupation condition will not.

This has implications for properties which are purchased ‘off-plan’. For capital gains tax purposes the ownership period begins on the day contracts for purchase are agreed and exchanged, not on the day the contract is completed. For an off-plan purchase the contracts may be exchanged many months or years before the property is finished and ready to inhabit.

As HMRC assumes the gain on the sale of the property accrues equally over the period it is owned, a large part of the gain is allocated to the period before the owner can move in.

If this applies to you, we should review your purchase contracts before you sell the property. If the contract contained conditions which effectively included break points in the agreement to purchase, the ownership period may be calculated from a later date, which will reduce your taxable gain.

Potts & Co Accountancy

Relief For First-Time Buyers

By | Budget Update, HMRC, Potts & Co Accountancy & Business Advice News, Property, Stamp Duty Land Tax

Stamp duty land tax (SDLT) is payable at rates ranging from 2% to 12% when you buy a residential property for £125,000 or more. Higher rates apply to the purchase of second homes and property acquisitions by companies.

If a residential property worth up to £500,000 is purchased by one or more first-time buyers, the first £300,000 of the purchase price is exempt from SDLT. This exemption applies for property purchases completed on and after 22 November 2017.

Many younger people buy their first home through a shared ownership scheme. In such cases, the buyer can choose whether to pay SDLT on the entire market value of the property or only on the share of the property they have acquired. If they elected to pay the tax on the full market value they could claim the exemption from SDLT, otherwise, the exemption for first-time buyers did not apply.

The law will be changed to allow the exemption for first- time buyers to apply even where they elect to pay SDLT only on the initial share acquired, as long as the market value of the whole property is no more than £500,000. This change in the rules will be back-dated to cover acquisitions completed on and after 22 November 2017.

Where excess SDLT has been paid since November 2017 it can be reclaimed by amending the SDLT return before 28 October 2019.

Scotland and Wales impose their own versions of SDLT for properties located in those countries.

Potts & Co Accountancy

Tax Exemption For Homes Clipped

By | Budget Update, Capital Gains Tax, HMRC, Potts & Co Accountancy & Business Advice News, Property

When you sell your only or main home, you expect any gain you make to be free of CGT. But that CGT exemption only applies if you have occupied the property as your main home for the entire period of your ownership.

If you move out of your home before it is sold, the gain accruing for the final period when you were not living there would be subject to CGT. However, the tax rules allow up to 18 months of the final ownership period to be CGT exempt even if you were not living in the property.

HMRC is proposing to cut this final exempt period to nine months for properties sold from 6 April 2020. If the owner, or their spouse, is disabled or has moved into a residential care home, the final exempt period is extended to 36 months.

If you let out a property which had been your main home at some point, you can claim Letting Relief to reduce the taxable capital gain by up to £40,000. Letting relief is capped at the amount of relief due for the time (usually a different period) in which you occupied the property as your main home.

HMRC wants to restrict letting relief to cover only periods in which the owner occupied the property while part of it was let. Homeowners who move and then let out their former home will be hit by this change in CGT relief, which is due to take effect for properties sold on or after 6 April 2020.

Potts & Co - Accountancy & Business Advice

Annual Tax On Enveloped Dwellings

By | Annual Tax On Enveloped Dwellings (ATED), HMRC, Potts & Co Accountancy & Business Advice News, Property

This tax, known as ATED, applies to residential properties owned by companies. It only came into effect on 1 April 2013 and was extended to properties worth over £500,000 from 1 April 2016.

Landlords who have transferred their residential property portfolios into companies need to be aware of the ATED. Where any of those properties was worth over £500,000 on the day the company completed the purchase, an ATED report is required and the tax may be due.

The first ATED charge is payable within 30 days of the completion date. For properties worth up to £1 million, the ATED is £3,500 for 2017-18, or a proportion relating to the part of the year for which the property was owned. The ATED charge for 2018-19 starts at £3,600 and is normally payable by 30 April 2018.

In most cases a relief can be claimed, notably where the property is let on a commercial basis to tenants who are not connected with the company. However, the relief must be claimed on the relief declaration return, which is also due within 30 days of the completion date or by 30 April within the tax year.

There are stiff penalties for late ATED returns, including relief declarations. One day’s delay earns a £100 penalty and six months can generate penalties of up to £1,300 per form. As relief from the ATED is claimed in advance, you must be careful to report to HMRC if the conditions for the relief are later broken. For example, the relief will no longer apply if the tenants become connected with the main shareholder or with the company. An amended ATED return must be submitted within 30 days of the start of the next year, so by 30 April 2018 for a condition broken in 2017-18.

We can help you submit the ATED forms, which, from 1 April 2018, must be submitted online.

Potts & Co - Accountancy & Business Advice

Rent A Room Relief

By | HMRC, Potts & Co Accountancy & Business Advice News, Property

This tax relief is designed to encourage people to let out a spare room to a lodger and hence increase the availability of low-cost accommodation.

In fact, the relief can also cover short-term lets. If you let rooms in your own home by the night through sites such as Airbnb, the scheme can apply, even if the letting amounts to a bed and breakfast business.

The relief covers gross rental income of up to £7,500 per year from letting furnished residential accommodation in your own home. You must live in the same property as the let rooms, though the relief can apply to rent received when you let the whole house for short periods, perhaps while you are away on holiday. It can’t apply to income you get from holiday lettings where you don’t also occupy part of the same property nor can it apply to income from a buy-to-let not simultaneously occupied by the landlord.

You don’t have to notify HMRC that you are claiming the relief if the gross rents received in the tax year don’t exceed £7,500. If the gross rents exceed that figure you must choose whether to be taxed on the excess above £7,500 or on the actual profits from the letting (the gross rents less any allowable expenses).

Potts & Co - Accountancy & Business Advice

Welsh Land Taxes

By | HMRC, Potts & Co Accountancy & Business Advice News, Property, Welsh Land Taxes

If you are about to buy a property in Wales, you need to consider the new land transaction tax (LTT) that comes into effect for all property deals which complete on or after 1 April 2018.

The LTT replaces stamp duty land tax (SDLT) and in general, its rates are lower (see table). If you are purchasing a residential property for more than £400,000 or commercial property costing more than £1.1 million, you may save some tax if you complete before 1 April.

There is no special exemption for first-time buyers, as the average amount paid for a first home in Wales is around £160,000 which falls within the zero-rate band. Individuals purchasing a second home for £40,000 or more will pay the additional property rate of LTT. Companies also pay the additional property rate on the purchase of residential properties for £40,000 or more.

Residential property price £ LTT rate % Additional property rate %
0 – 180,000 0 3
180,001 – 250,000 3.5 6.5
250,001 – 400,000 5 8
400,001 – 700,000 7.5 10.5
700,001 – 1.5m 10 13
Over 1.5m 12 15


Potts & Co - Accountancy & Business Advice

Property Allowance

By | Personal Tax, Potts & Co Accountancy & Business Advice News, Property

When you let one or more furnished rooms in your own home, the rental income can be free of tax if it is covered by rent -a-room relief, currently capped at £7,500 per year. But this relief only applies where the room is used as residential accommodation.

If the room is used as an office, for storage or perhaps as a garage or parking space on your drive, rent-a-room relief does not apply. In those cases, the rental income can now be tax-free if it does not exceed £1,000 per year and the conditions for this new property income allowance apply.

You can’t use the property income allowance to boost the tax-free rent from residential accommodation to £8,500 per year, as the allowance can’t apply if rent-a-room does.

Where your non-residential let brings in more than £1,000, you can choose to deduct the allowance from your gross rents or to calculate the taxable rental income deducting allowable expenses, but ignore the allowance. When you use the property allowance you can’t also deduct expenses.

Where the rent is paid by your own company, or by a company that employs you or a family member, you can’t use the property allowance against that income.

Potts & Co - Accountancy & Business Advice

Non-Resident Property Owners

By | Budget Update, Potts & Co Accountancy & Business Advice News, Property

When UK property is held by overseas landlords, the rental income should be taxed in the UK, but any gains made on selling the property often escape UK tax. Since 6 April 2015 non-resident individuals and private companies must pay non-resident capital gains tax (NRCGT) on any gains accrued since that date when they sell UK residential property.

Gains made from selling commercial property and any gain attributed to periods before April 2015 still escape UK tax, which encourage the holding of properties through companies based in tax havens.

The Government is proposing to extend NRCGT to gains made from any type of immovable UK property, when it is sold by non-resident corporations or individuals from April 2019. Only the gain which accrues from April 2019 onwards will be taxed in the UK.

The new tax charge will also apply to indirect property-related gains, where a property-rich entity (one where 75% or more of its gross asset value is represented by UK immovable property) is sold instead of the property it holds.

The NRCGT is charged at the rates which would have applied if the vendor had been resident in the UK when the sale took place. The sale must be reported to HMRC within 30 days of completion, and if the vendor is not already registered with HMRC, the tax must also be paid within 30 days of the sale.

Potts & Co - Accountancy & Business Advice

Selling Your UK Home

By | Non-Resident Capital Gains Tax (NRCGT), Potts & Co Accountancy & Business Advice News, Property

Once you have moved abroad your tax status in relation to the UK changes to ‘non-resident’, and you become subject to different tax rules.

Importantly, when a non- resident person sells a home in the UK, that disposal must be reported to HMRC within 30 days of completion of the deal. This deadline comes as a surprise to many conveyancing solicitors as they concentrate on reporting the property purchase, as the purchaser has to pay Stamp Duty Land Tax (or LBTT in Scotland) within 30 days.

Since 6 April 2015 a sale of residential property by a non- resident vendor must also be reported online, in order to pay the Non-Resident Capital Gains Tax (NRCGT) charge within 30 days of the deal. Even if there is no tax to pay because the taxable gain is covered by allowances, the NRCGT return must still be submitted within 30 days of the completion date.

Taxpayers who are already registered with HMRC can defer payment of the NRCGT charge by ticking a box on the return.

An automatic £100 penalty applies if the NRCGT return is even one day late. When the return is six months late, a further £300 penalty is due, with another £300 if the return is twelve months late.

All late filing penalties can be appealed and may be cancelled if the taxpayer has a reasonable excuse, but ignorance of the law is not a reasonable excuse.

Potts & Co - Accountancy & Business Advice

Myths About Letting

By | Potts & Co Accountancy & Business Advice News, Property


Income you receive from letting a property must be declared to HMRC, and you should also claim any qualifying associated expenses related to that letting.

There is a £7,500 annual allowance to cover income from letting a room in your own home to a lodger, but other rental income must be declared. This applies even if you didn’t set out to make a profit from your property, such as in the following situations.

Posted Abroad

People serving in the armed forces and those who work for multinational companies may be required to relocate to another country for significant periods. Where their UK home is let out the rent should have tax deducted by the letting agent, or tenant, under the non-resident landlord scheme, unless the landlord has been granted gross

payment status under that scheme. The landlord also needs to declare the rental income on their UK tax return.

Pub Tenants

Pub landlords who live above their pub may let out their former home. Even if the rent income only covers the mortgage payments on their own property, the whole amount of income and expenses must be declared on the owner’s tax return.

Student House

Parents may buy a property for their offspring to live in while at university. Where the property is also let to other students, who pay rent to the parents, that income must be declared on the parents’ tax returns. As the property is not the main home of the parents the rental income doesn’t fall under the £7,500 rent-a-room relief exemption.

Care Home

An individual may partly fund the cost of their accommodation in a residential care home by letting their former home. Although all the rental receipts are used to pay for the care home fees, the rent must be declared on the recipient’s tax return and tax will be payable on the profits.

Where you haven’t declared rental income correctly you can make a full disclosure to HMRC, and pay the tax due without fuss. This can be done by amending your last tax return, or if the non-declaration goes back a few years, use HMRC’s Let Property Campaign service. Talk to us if you’re affected.