In March 2021 the Chancellor Rishi Sunak announced the Spring Budget. We have summarised some of the key points that will be of interest to landlords and property investors.
Mortgage guarantee scheme
The government will introduce a new mortgage guarantee scheme in April 2021. This scheme will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of 5% on homes with a value of up to £600,000.
Under the scheme, all buyers will have the opportunity to fix their initial mortgage interest
rate for at least five years should they wish to. The scheme, which will be available for new mortgages up to 31 December 2022, is designed to increase the availability of mortgages on new or existing properties for those with small deposits.
Corporation tax rates
The main rate of corporation tax is currently 19%, and it will remain at that rate until 1 April 2023, when the rate will increase to 25% for companies with profits of over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less.
Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporate tax rate.
Capital gains tax (CGT) rates
No changes to the current rates of CGT have been announced at Budget 2021. This means that the rate remains at 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains, mainly chargeable gains on residential properties except for any element that qualifies for Private Residence Relief.
There are two specific types of disposal that potentially qualify for a 10% rate up to a lifetime limit for each individual:
- Business Asset Disposal Relief (BADR) (formerly known as Entrepreneurs’ Relief).
- This is targeted at directors and employees of companies who own at least 5% of the ordinary share capital in the company, provided other minimum criteria are also met, and the owners of unincorporated businesses.
- Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly subscribed shares.
The lifetime limit for BADR was reduced from £10 million to £1 million for BADR qualifying disposals made on or after 11 March 2020. Investors’ Relief continues to have a lifetime limit of £10 million.
CGT annual exemption
The CGT annual exemption will be maintained at the current 2020/21 level of £12,300 for 2021/22 and up to and including 2025/26.
Transaction taxes
Land and buildings transaction taxes are devolved to Scotland (Land and Buildings Transaction Tax) and Wales (Land Transaction Tax). Stamp Duty Land Tax (SDLT) applies to transactions in England and Northern Ireland.
All these taxes have had a temporary increase in the nil-rate threshold for residential properties. The thresholds were set to return to the previous thresholds from 1 April 2021.
Budget announcement about stamp duty
The government will extend the temporary increase to the SDLT nil rate band for residential property in England and Northern Ireland to 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000. The nil rate band will return to the standard amount of £125,000 from 1 October 2021.
SDLT surcharge
New SDLT rates are proposed for purchasers of residential property in England and Northern Ireland who are not residents in the UK. The new rates will be 2% higher than those that apply to purchases made by UK residents and will apply to purchases of both freehold and leasehold property as well
as increasing SDLT payable on rents on the grant of a new lease. The surcharge will apply to land transactions with an effective date of 1 April 2021 or later. Transitional rules may apply to some contracts exchanged before 11 March 2020 but completed or are substantially performed on or after 1 April 2021, or some contracts substantially performed on or before 31 March 2021 but not completed until 1 April 2021 or later.
If you are a landlord or property investor and you would like some advice on how these changes will affect you, please do contact us.
You can call 01623 490 120 or email