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Property taxes

ICAEW Tax Faculty provides analysis of the announcements relating to property taxes in the 2018 Budget.

Full summary of changes

Read the Tax Faculty's comprehensive summary of the announcements on tax and related matters

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Rent-a-room relief

Following a call for evidence earlier this year HMRC put forward draft legislation in July 2018 to include a ‘shared occupancy test’ for rent-a-room relief. This change will not now go ahead.

The relief allows income of up to £7,500 per annum tax-free from renting out a room in your main or only residence and was first introduced in 1992 to encourage the release of additional accommodation. It was envisaged that people would provide a spare room for students or for people working away from home during the week. The advent of the internet and websites like Airbnb have enabled people to rent out entire houses very easily, moving the relief away from the original policy intention.

The draft legislation introduced a shared occupancy test in order for the relief to apply but the meaning of shared occupancy was not made clear. In our representation (ICAEW Rep 108/18) we expressed our concern about the difficulty of defining and monitoring shared occupancy and we are pleased to note that our comments have been heeded and the legislation will not now be introduced.

HMRC will work with stakeholders to ensure the rules around the relief are clearly understood.

Business rates

The change in the way we shop, buying more online and less in the high street shops, has been causing problems, with many shops (including very large chains) going under, and there have been cries for the government to help. The cries were heard and there is some help for small businesses:

  • Through the government’s ‘Our Plan for the High Street’, support will be given by cutting the business rates bill by one-third for retail properties with a rateable value below £51,000 for two years from April 2019.
  • The plan includes a £675m Future High Streets Fund, a High Streets Task Force to support local leadership and funding to strengthen community assets.
  • The £1,500 business rates discount for office space occupied by local newspapers will continue in 2019/20.
  • Local authorities will be compensated for these measures.

The measure milked for the most laughs by the Chancellor was the announcement that a 100% business rates relief will be given for all public lavatories. More than a quarter of public toilets have been closed down since 2000 as they are an easy target for cash strapped councils.

Business rates are payable by owners of self-catering and holiday letting accommodation and these are generally lower than the council tax would be on the same property. There are no restrictions on how many weeks the property is let, unlike the rules for furnished holiday lets for income tax, and the government is concerned that not all those paying business rates are genuine businesses. A consultation will be published on the criteria for chargeability to business rates.

Annual tax on enveloped dwellings

The annual tax on enveloped dwellings (ATED) will rise by 2.4% from 1 April 2019 in line with CPI. The revised rates are as follows:

Property value
Charge for tax year 2018/19  Charge for tax year 2019/20
More than £500,000 but not more than £1m
£3,600 £3,650
More than £1m, but not more than £2m £7,250
More than £2m, but not more than £5m
More than, £5m, but not more than £10m
More than £10m, but not more than £20m £113,400
More than £20m

Note: the charges apply for years beginning on 1 April and ending on 31 March, rather than tax years.

Private residence relief

See the section on Capital taxes and trusts.

Stamp duty land tax

See the section on Stamp taxes.

Non-resident companies: treatment of UK property income

See the section on Business and company tax.