The Chancellor made various announcements on 17 November 2022 in his Budget impacting on the taxation of UK real estate.
Capital Gains Tax
The Chancellor has retained the headline rate of capital gains tax (CGT) but has reduced the CGT Annual Exempt Amount from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.
This change will impact UK and non-UK resident individuals, who may be subject to capital gains tax on direct and certain indirect disposals of UK property.
Income Tax
The income rates (20%, 40% and 45%) together with the tax personal allowance and the higher rate threshold are to remain unchanged until at least April 2028. However, the income tax additional rate threshold (at which the 45% rate applies) is to be lowered from £150,000 to £125,140 from 6 April 2023.
The reduction in the 45% additional rate threshold will impact on the income tax rate paid by certain UK/non-UK individuals, and certain trusts, on UK property income.
In addition, the Dividend Allowance available to UK resident individuals is reducing from £2,000 to £1,000 from April 2023, and to £500 from April 2024.
Corporation Tax
As per previous announcements, the rate of corporation tax will increase from 19% to 25% from 1 April 2023, as originally planned. No further changes to the rate were announced today.
SDLT
On 23 September 2022, the Chancellor announced a reduction in SDLT for certain residential property acquisitions.
Firstly, the residential nil-rate tax threshold was increased from £125,000 to £250,000. In addition, the nil-rate threshold for First Time Buyers’ Relief was increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief was increased to £625,000.
Although the September announcement indicated that these changes would be permanent, the Chancellor has today advised that the cuts will now be temporary, and will only remain in place until 31 March 2025.
No changes were announced to the existing 3% additional dwelling supplement or the 2% foreign buyers surcharge which will continue to apply to residential property acquisitions.
ATED
The annual ATED charges will increase in line with inflation as in previous years.
Investment Zones
Kwasi Kwarteng had previously announced in September that tax benefits would be introduced in respect of certain designated investment zones (in relation to business rates, SDLT, NIC and enhanced capital allowances).
However, the Chancellor has today announced that the government will ‘refocus the Investment Zones programme to catalyse a limited number of high potential clusters, working with local stakeholders, to be announced in the coming months’.
No further details were announced.
Capital Allowances
The September announcement that the capital allowances Annual Investment Allowances would be permanently set at £1m has been reconfirmed. The AIA is an annual 100% allowance for investment in qualifying plant and machinery (up to that limit) per company, or where relevant, group of companies, groups of companies under common control, and other ‘related’ companies under common control.
Business rates
On Business Rates, the Chancellor has announced that:
- The business rates multipliers will be frozen in 2023-24 at 49.9 pence and 51.2 pence;
- Every property will receive a new Rateable Value in April 2023;
- A Transitional Relief Scheme will be introduced to cap bill increases caused by changes in rateable values at the 2023 revaluation. The ‘upward caps’ will be 5%, 15% and 30%, respectively, for small, medium, and large properties in 2023-24;
- Support for eligible retail, hospitality, and leisure businesses will be extended and increased from 50% to 75% business rates relief up to £110,000 per business in 2023-24. This is unlikely to have any effect for larger retailers with multiple properties;
- A ‘Supporting Small Business Scheme’ will be introduced to cap rate increases for small businesses;
- The introduction of Improvement Relief (to ensure ratepayers do not see an increase in their rates for 12 months as a result of making qualifying improvements) will be delayed to April 2024, instead of April 2023;
- Following consultation, the government has decided not to introduce an Online Sales Tax, an idea put forward by certain stakeholders in the context of reducing the business rates burden.