No more preferential treatment for corporations from January 2018

 

Second homeowners and buy-to-let landlords operating as individuals have been paying more capital gains tax than businesses, but this is set to change.

When an asset, such as a second home, is sold for a higher value than what was originally paid for it, capital gains tax of up to 28% of the price rise must be paid by the seller.

Unless, that is, the seller is a corporation, in which case the same capital gains tax applies but with a relief linked to inflation – the level of inflation can be deducted from the amount of capital gains, saving the company money. This is an indexation allowance.

In this week’s Autumn Budget, Phillip Hammond revealed that from January 2018, the indexation allowance would no longer be available to companies.

“There is a case now for removing the anomaly of the indexation allowance for capital gains – bringing the corporate system into line with personal capital gains tax,” Hammond said. “I will therefore freeze this allowance so that companies receive relief for inflation up to January 2018, but not thereafter.”

Other assets

Although the property market is an area where this change will be key, due to the nature of capital appreciation in the housing sector, it will affect all assets that are subject to capital gains tax.

The move is expected to bring in an extra £1.2bn over the next five years and will affect a huge number of businesses.

According to Yvette Nunn, owner partner and director of advisory firm Berkeley Associates, the effects will be mainly felt when inflation rates are high.

“The government has announced this measure as bringing companies in line with individuals (who cannot claim any relief for inflation related increases in assets values),” she said.

“However, it does not completely level the playing field, as individuals are entitled to a tax-free annual exemption for chargeable gains (currently £11,300) which is not available to companies.

“When inflation rates are relatively low, indexation allowance may not make much of a difference to the calculation of company gains. However, it does become more important in times of high inflation.”

Inflation rates according to October’s figures are now at around 3%, the highest they’ve been since April 2012.

Highgrove Mews

High Net Yield Freehold Houses

  • Commutable to London (27 mins to central Paddington station)
  • Rental demand extremely strong with large industry presence in Reading
  • Freehold with 4% net yield

£284,955 - £457,000

St Petersgate – Stockport Manchester

New Launch - Stockport Manchester, apartments from £160,000

  • Discounted launch prices from £160,000
  • Excellent transport links with 3 trains per hour to London Euston and only 9 mins journey to Manchester Piccadilly
  • Experienced development team

Assured Rent Housing Association Leases

Assured Rent Housing Association Leases

  • Assured rent & no rental voids
  • Tenant damage cover & newly refurbished inline with requirements of a corporate sitting tenant
  • Free property and lettings management

From £62,000

Emerging Birmingham Commuter Town With Properties From Just £104,000

The emerging Birmingham commuter town where properties are selling in an average of just 24 days

  • A collection of 62 two bedroom apartments and 28 one bedroom apartments.
  • DE14 is one of the fastest selling postcodes in the West Midlands.
  • 23 minute train journey into Birmingham New Street Station.

Properties from £104,000

Mill, Stockport

The Northwest's emerging property hotspot

  • Discounted off-plan 2-bed prices from £162,000
  • Completion date - Q4 2021
  • Rental yields - 6% plus

Discounted off-plan 2-bed prices from £162,000

South Central – Birmingham City Centre Apartments

Highly anticipated 28 storey launch in Birmingham City Centre with an impressive roof garden and communal facilities.

  • 154 units across 28 storeys
  • Residential multi-media community room, gym, roof garden and sky cinema
  • Excellent future connectivity via the metro system to other key transport hubs and locations around the city

from £205,800

ba-

Talk to us

Speak to our UK property experts today: 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

+852 9865 4446

Open from 9am-6pm HKT

Stamp Duty Calculator

.

Unlock members only investment opportunities and full development details. Join now – it’s free, quick and easy.

Login

Not a member? Sign up for free

tax

No more preferential treatment for corporations from January 2018

Example

By submitting your details via this online form you agree to be contacted via email/phone/SMS by Direct Marketplace Ltd t/a BuyAssociation in relation to property investment and property developments . We do not share your personal details with third parties.  To view our full Privacy Policy click here.