Non Dom Status and New Inheritance Tax

From 1st April, if you havent already heard, the effective rate of stamp duty on second homes/ buy to let properties in the UK will increase by 3%. That means if you're buying a flat at a price of £1,500,000 you will be paying £138,750 instead of the current rate of £93,750. An increase of £45,000!

This, together with the phasing out of tax relief for mortgage interest from 2017, will increase the tax burden for property investors holding property or thinking of adding to their portfolio in the UK. (albeit funds with more than 15 properties will could have exemption)

It is calculated that any higher-rate taxpayer landlord whose mortgage interest is 75pc or more of their rental income, net of other expenses, will see all of their returns wiped out by 2020. For additional-rate (45pc) taxpayers, the threshold at which their investment returns are wiped out by the tax is when mortgage costs reach 68pc of rental income. Some current basic-rate taxpayers will also be hit, because the change will push them into the higher-rate tax bracket.

If you're an overseas landlord holding your property in an off shore company, there are even darker skies on the horizon as in 2017 there are new inheritance tax provisions, which effectively mean that any such properties will be treated as though they are not in a company and will be subject to IHT at up to 40%. The classic tax shield of overseas SPV's, whether domiciled in Gibraltar or in other jurisdictions, for buy to let properties will be removed.

This together with New Non Dom status rules are making it increasingly important for property investors in the UK, some of them being resident in Gibraltar to take advice on how to manage these changes.

If you wish to discuss, I have arranged a free consultation with Berkshire Wealth Management, specialists in tax planning for HNI's, who are working with BDO to plan away some of these problems.

This isn't going away, so do contact me, if youre interested in finding out more.