Good and Bad News From The Autumn Statement.
In recent years the Autumn Statement has had more things affecting holiday home owners than the main budget and this year was no exception. First the good news that Small Business Rate Relief at 100% has been extended to April 2017 meaning that holiday lets will pay no business rates or council tax for another year. We will watch developments with interest regarding the transfer of business rates receipts directly to local authorities. At the moment it seems they would have the power to reduce but not raise the rate but any control over relief would clearly make a big difference.
The big news was that there would be a 3% stamp duty increase for second homes including buy to lets and we have to assume holiday homes whether qualifying as a business or not. It’s a chunk of money though for properties between £250,000 and £350,000 it actually amounts to part or all of the savings that came from the reform in April. I don’t think it will have a big effect on demand or prices in the long term but we may well see a surge in the market up to April and a lull afterwards. It’s not clear how a second home will be defined, particularly if a husband & wife or unmarried couple will get one home each, we await further clarification.
Finally came the announcement that Capital Gains Tax will be due within 30 days of completion of a sale rather than the current arrangement which could see you hanging on to the money for anything up to 20 months. This is not much of a surprise as ‘payment on account’ was introduced for self employed tax some time ago and it’s a logical extension of this principle. Presumably if you are a higher rate taxpayer you will have to pay at the higher rate regardless of any forthcoming change of circumstances.
Remember that qualifying holiday lets have the benefit of entrepreneur’s relief which means a flat rate of 10% on the gain rather than 18% or more commonly 28% as property gains tend to push people into the higher band anyway. This can be a very considerable saving on a property that has been held for a long time.