finance
How to find a way through new government home regulations
The Government’s changes to tax affairs and allowances in buying and letting homes for rent or simply buying a second home are causing confusion and alarm to those who are considering investing or are already established in this sector, writes Owen Kyffin, director and tax specialist of Whitley Stimpson
I have already contacted clients because of the complexity and concern over the new regulations. But I must emphasise that work is still in progress in eliciting all the facts and the intent of the new rules.
The matter is not helped by the fact that advice from the Treasury and the tax authorities do not always line up and, according to some newspaper reports, a number of people are currently paying the wrong amounts in stamp duty when purchasing.
As a general rule, those who already receive income from a rented residential property may be affected adversely through having to pay additional stamp duty land tax (SDLT) if they buy
further properties or a second home for themselves that cost in excess of £40,000.
However, according to some reports, there may be a loophole in the new regulations for those who sold their main home before November 2015 and intend to buy a new one before November 2018.
I mention this in particular because, if this loophole turns out to be true it will not affect all that many people, but it serves to emphasise the confusion still at large.
What is more certain are the new rules for calculating tax relief on mortgage interest paid which are due to come into effect from the 2017/18 tax year. These changes will affect higher-rate taxpayers.
However, some of these changes may differ according to people’s personal circumstances.
Such is the confusion there are many reports of a rush to buy property before the introduction of the new rules and considerably less activity now that the new rules are in being.
In the meantime, my team and I are working hard to get definite rulings from government departments on the small print surrounding their new and confusing regulations and we will be updating our customers accordingly, including alternative ways of investing if necessary.
There are also other less obvious consequences of the new legislation. For example the restrictions to relief on mortgage interest operates by increasing rental profits, which leads to an increase in total income for tax.
The knock-on effects depend upon the individual’s personal circumstances but could easily
EY ITEM Club weighs up economic situation
The EY ITEM Club has revised its GDP growth forecast for this year down from 2.3% to 1.9%, and down from 2.6% to 0.4% in 2017. It sees Brexit uncertainty as likely to hold back business investment and consumer spending, resulting in a rise in unemployment. Exports, however, are likely to be boosted by a weaker pound which will benefit those selling to the US and emerging markets.
The forecast is that the UK economy, post-referendum, will take a very different path to the one expected three months ago. While the fundamentals will not change in the short term, there are likely to be severe confidence effects on spending and business investment, resulting in anaemic GDP growth for at least the next three years.
Business investment is expected to see a larger relative hit, falling by 0.9% in 2016 and by 2% in 2017 – down from the April
36
businessmag.co.uk
forecast of growth of 3.2% and 7.8% respectively.
On the other hand, the prediction is that exports will increase by 3.4% in 2017 while imports will fall by 0.3%. Consequently, the forecast expects net exports to add 1.1% to GDP next year, the strongest contribution from this source in six years.
The EY ITEM Club believes that the longer-term outlook for the economy will be determined both by domestic policies in areas like regulation and by the UK’s ability to secure trade deals with the EU and other markets. The forecast assumes that post-2019 the UK will be able to negotiate a free-trade agreement with the EU similar to the recent EU-Canada deal, which keeps trade between the UK and the EU free of tariffs.
Peter Spencer, chief economic adviser to the EY ITEM Club, commented: “Longer-term, the UK may have to adjust to a
permanent reduction in the size of the economy, compared to the trend that seemed possible prior to the vote.”
Richard Baker, managing partner at EY across the Thames Valley and South Coast, said: “Government needs to quickly introduce measures to help offset Brexit blues, support the economy and continue to attract foreign investment in the regions.”
He added: “As the world’s fifth largest economy, the UK will continue to be an integral piece of the global jigsaw. While investors value the UK’s access to the single market, we shouldn’t forget that they also rate the UK’s quality of life, diversity and culture, education, stability of social climate, telecommunications, and labour skills highly. These underlying fundamentals have not changed.”
By the end of the year the EY ITEM Club expects sterling’s
trade-weighted value to be 15% down on the level in Q4 2015. This will not be enough, however, to prevent a significant deterioration in the UK’s growth outlook, compared with the predictions the EY ITEM Club made in April.
The EY ITEM Club expects the Monetary Policy Committee (MPC) to cut interest rates to zero by November but says that inflation is likely to rise above 2% by the end of this year, averaging 2.5% in 2017, before slowing to 1.6% in 2018.
The forecast sees unemployment rising from 5% currently to 7.1% by the end of 2019. This will have a knock- on impact on household real disposable income, which is forecast to fall by 0.5% in 2017. Consumer spending is expected to increase by 2.2% this year but then drop by 0.6% in 2017, the first decline since 2011.
THE BUSINESS MAGAZINE – THAMES VALLEY – SEPTEMBER 2016
mean other income and capital gains are pushed into the higher rate bands. There is also an impact for anyone claiming tax credits and child benefit which might then be clawed back under the Higher Income Child Benefit Charge. Thus the actual rate of additional tax could be significantly greater than the 20% headline figure.
In my view the best advice is coming from business advisers and I am urging our clients to contact me through the website or by phone if they are in any doubt over their current or future situation.
whitleystimpson.co.uk 01295 270200
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52