The Chancellor’s Summer Statement introduced temporary changes in stamp duty land tax on homes, which prompted similar – but not identical – changes in Scotland and Wales.

In his Statement on 8 July, the Chancellor raised the starting point for stamp duty land tax (SDLT) in England and Northern Ireland from £125,000 to £500,000 until 31 March 2021. Shortly afterwards, the Scottish government made a change to the nil rate band of its Land and Buildings Transaction Tax (LBTT), increasing it from £145,000 to £250,000. Last of the line was Wales, which adopted a slightly different tack, raising the nil rate band on land transaction tax (LTT) from £180,000 to £250,000, but only for main home purchases, but not for second homes or buy-to-let investments.

Outside of Wales the tax cuts prompted several news stories about a boost to the buy-to-let market. There is no arguing that the costs of buying an investment property have dropped – by up to £15,000 in England and Northern Ireland. However, the extra 3% SDLT surcharge on the full price will continue in England and Northern Ireland, as will the corresponding 4% LBTT levy in Scotland.

The other tax changes which have been made to buy-to-let over recent years remain unaltered, meaning that:

• any personal mortgage borrowing cannot be offset against rent received but instead qualifies for a 20% tax credit; and
• any capital gains on sales not covered by the annual exemption are subject to rates of up to 28% and the tax must be paid within 30 days of completion.

In the English context it is also worth remembering that there is still an unfinished consultation on ‘modernising the rental sector’, including the possibility of removing the availability of assured shorthold tenancies (ASTs).

Another upshot of the tax changes was the suggestion that they had given buy-to-let investors, who directly own their property, a chance to move the property into a company, at a reduced cost, to increase tax-efficiency. This may be true in some instances, but any such transfer could result in one of the 30-day capital gains tax bills.
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Buy-to-let investment has been on the government’s hit list since 2016. If the stamp duty and land tax cuts tempt you to think about investing in this sector, make sure you take advice and understand all of the tax consequences before doing so. 

The Chancellor has asked the Office of Tax Simplification to review capital gains tax (CGT).

Within a week of giving his Summer Statement, the Chancellor wrote to the Office of Tax Simplification (OTS) asking it to “undertake a review of CGT and aspects of the taxation of chargeable gains in relation to individuals and smaller businesses”.  The request was unexpected and prompted some press speculation that Rishi Sunak was beginning his hunt for extra tax revenue after the unprecedented spending on Covid-19.
CGT is certainly an interesting place to start:

• The latest data from HMRC show that there were fewer than 300,000 CGT payers in 2017/18.
• Nearly two thirds of the tax raised in that year came from 3% of CGT payers who made gains of £1 million or more.
• Over half of the CGT payers either paid no income tax, or paid it only at the basic rate, as the graph below shows.

The main reason why CGT payers are such a rare breed is the annual exemption. For 2020/21 this allows up to £12,300 of net gains to be realised before any tax becomes payable. Even then, the maximum tax rate is 20% (28% for residential property).

At the last election, both the Labour Party and the Liberal Democrats called for gains to be taxed at full income tax rates and for the exemption to be cut to just £1,000 or abolished. The Conservative manifesto made no comment – CGT was not one of the taxes for which a rate freeze was promised.
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Neither Mr Sunak nor the OTS has put any date on when the review might be published. However, the OTS has asked for all comments to be in by 12 October, so government proposals might emerge in the Autumn Budget, particularly if that Budget appears later in the year. There is a precedent for changing CGT rates part way through a tax year – as then Chancellor George Osborne did in 2010. With this in mind, a wise precaution could be to review your portfolio and consider whether you wish to realise any gains in the next few months, while the current generous CGT regime is in place.

The government committed to undertake a fundamental review of business rates in England at the Spring Budget. It has now issued a call for evidence, with views on reliefs and the ‘multiplier sort’ by 18 September. Although fundamental reform is for the longer term, the intention is to have some improvements in place for April 2021.

High street retailers were already struggling against online competition prior to the Covid-19 crisis, but months of closure and reduced sales have exacerbated the impact of business rates, with online competitors having much lower bills. The review will look at these issues and concerns around complexity, rigidity and how the regime could be improved and made fairer.

The next revaluation of business property was scheduled for 1 April 2021. This was then put back by a year, but will now not take place until 1 April 2023. In the meantime, however, the government intends to introduce some intermediary changes.

Reliefs
Business rates reliefs can be complex and often poorly targeted. Small business rate relief, for example, is based on rateable value, taking no account of the actual size of a business or how profitable it might be.

• There is significant regional variation in eligibility.
• Landlords may negate any benefit by increasing the rent for eligible properties.

The government review will look at how reliefs can be targeted more effectively, made robust against abuse, and whether their administration can be simplified.

The multiplier
A business rates bill consists of a property’s rateable value calculated by a multiplier.

• Businesses have raised concerns about the level of this multiplier and the rate at which it has been increased.
• There is also criticism that business rates are unresponsive to changes in the property market.

One option being considered is the introduction of additional multipliers that vary by geography, property value, or property type.

Longer term
An online sales tax has been suggested as a possible replacement for business rates. Such a tax, however, would be unlikely to raise comparable revenue, so is more likely to run alongside business rates.