RLA : RPI : Brown serves up mixed Budget

News from the Residential Property Investor, the bi-monthly magazine for RLA members

other artilces from the April / May 1999 issue

Brown serves up mixed Budget - April / May 1999

Chancellor Gordon Brown had good and bad tax news for landlords in his 'last Budget of the 20th century' last month.

Heading the 'bad news' category was an increase in stamp duty, although only for transfers of property priced £250,000 and above.

Duty on transfers valued at between £250,001 and £500,000 is now 2.5 per cent, and on transfers worth over £500,000, 3.5 per cent - both up by 0.5 per cent.

Another change affecting all property transfers is that interest is to be charged on late payment of stamp duty.

Against this, the annual capital gains tax threshold below which gains are tax free has been raised by £300 to £7,100. And capital gains tax rates have also been 'simplified'. From 1999-00 capital gains tax rates will be aligned with those for savings income and will be charged at 20 per cent, where gains and income together total less than £28,000, but 40 per cent where they exceed this figure.

This does not apply to capital gains made by landlords who operate as limited companies, which have their gains taxed under the corporation tax regime. However, this group will benefit from a new lower rate of corporation tax that will operate from next year - when the rates will be 10 per cent for profits of up to £10,000.

This year's standard rate and higher rate of corporation tax are both down by 1 per cent - to 20 per cent and 30 per cent respectively . And the Chancellor has promised rates will remain at current levels 'or lower' for the remainder of this Parliament.

Other changes included an increase in the inheritance tax threshold by £8,000 to £231,000.

Above this inheritances are taxed at 40 per cent - lower for life-time transfers within seven years of death.

In a move to increase competition within financial services building societies and banks will be required to publish 'reliable price information on mortgages'.

Meanwhile two measures to reverse current law could hit landlords.

'Reverse premiums' offered by as incentives to induce tenants to take out leases, primarily of commercial property, are to be made subject to tax (reversing a recent decision of the Privy Council).

And there will be legislation to tax 'gift with reservation' inheritance tax avoidance schemes. Confirmed as effective by the House of Lords when ruling on Ingram v IRC last year, such schemes involved dividing property between the freehold and a newly created lease. The person wishing to avoid inheritance tax gave away the more valuable freehold but kept the leasehold - and with it the right to live in the property.

other artilces from the April / May 1999 issue