Travis Koivula, CFA, CFP, CIM, FCSI, CSWP’s Post

I’m a property owner, and I’m considering renting one of my houses out for people to use for vacations. What are the tax rules I need to understand? It‘s a timely question, and unfortunately for you, there was a change announced in the Budget that will mean you can no longer benefit from a certain type of tax relief in the future. At the moment, there are tax breaks for second homeowners letting to holiday makers in the shape of the Furnished Holiday Lettings (FHL) regime. Among the advantages of the scheme is the fact that property owners can deduct the full amount of finance costs, such as mortgage interest, from FHL income. And when selling the property, business asset disposal relief may be available. That results in a 10% capital gains tax rate applying. But the FHL scheme is to be disbanded, Jeremy Hunt has revealed. Currently, the tax breaks make it more profitable for second homeowners to let out their properties to holiday makers rather than to residential tenants to rent, raising concerns over the availability of long-term rental housing for local people. According to HMRC, if you rent properties that qualify as FHLs, you can get the following benefits: - you can claim Capital Gains Tax reliefs for traders (Business Asset Rollover Relief, Entrepreneurs‘ Relief, relief for gifts of business assets, and relief for loans to traders) - you‘re entitled to plant and machinery capital allowances for items such as furniture, equipment, and fixtures Furthermore, the profits count as earnings for pension purposes, meaning tax-advantaged pension contributions can be made. If the change takes effect and is passed into law, the existing rules will be scrapped from April 2025. But you would have one year during which you could benefit from the current scheme. If you‘d like to understand more about the tax implications of property ownership, please get in touch. Email [email protected] call 01793 488544 or DM. #PropertyTax #FurnishedHolidayLettings #TaxRelief #CapitalGainsTax #HMRC #PropertyOwnership #TaxImplications #TaxPlanning

Chancellor Rachel Reeves’ Budget statement this afternoon highlighted tax hikes for both working individuals and British businesses. 💼 There were several tax announcements that directly and indirectly affect those working and investing in the property industry. 💷 🔺 National Insurance There was bad news for employers, as Reeves announced that National Insurance contributions by employers will rise from 13.8% to 15%. In addition, the threshold at which businesses start paying National Insurance on a workers’ earnings will be lowered from £9,100 to £5,000. 🔺Capital gains  The rates on residential property will remain at 18% and 24%. 🔺Inheritance Tax  Reeves said she will extend the inheritance tax threshold freeze for a further two years to 2030. That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax free allowance is passed to a surviving spouse or civil partner, she said. She added that she will bring inherited pensions into inheritance tax from April 2027. 🔺Stamp duty Reeves announced that the government will increase the stamp duty land surcharge for second-homes by 2% to 5% from tomorrow. Right to Buy discounts  The chancellor is slashing the ‘right to buy’ discount given to those purchasing their council home. 🔺New homes  The chancellor says the government will invest more than £5bn to deliver their housing plan. 🔺Affordable housing  She added this Budget will increase the Affordable Homes Programme to £3.1bn, provide £3bn worth of support and guarantees to increase the supply of homes and support small housebuilders. #budget #property #housing #propertyindustry #homes #agents

The 2024 Spring Budget brought about significant changes, including notable adjustments impacting Furnished Holiday Lettings (#FHL) and Capital Gains Tax (#CGT). In this blog post, we delve into these alterations, offering insights into the associated tax implications and potential effects for you > https://bit.ly/3VjTR51 #Brighton #SpringBudget

The 2024 Spring Budget brought about significant changes, including notable adjustments impacting Furnished Holiday Lettings (#FHL) and Capital Gains Tax (#CGT). In this blog post, we delve into these alterations, offering insights into the associated tax implications and potential effects for you > https://bit.ly/3VjTR51 #Brighton #SpringBudget

Effective June 25, a new capital gains tax rule will impact those selling secondary properties in Canada. Currently, sellers are taxed on 50% of any capital gains. After the change, they'll be taxed differently: 50% on the first $250,000 and 66.7% on any amount above that threshold. This shift has raised concerns among real estate investors, agents, and owners of vacation and secondary properties. A capital gains tax applies when individuals sell assets for more than their purchase price. It doesn't affect primary residences, where profits are tax-free upon sale. Secondary properties like cottages and rental units are subject to this tax. For properties sold by trusts or corporations, 100% of gains are taxed at the higher 66.7% rate. Despite confusion, these percentages indicate the portion of profits subject to tax, not the total tax paid. Sellers can deduct expenses from their taxable profit. For example, a cottage owner selling for $750,000 after buying for $250,000 twenty years ago, with $53,000 in expenses, faces taxes on $256,399 of profit. This change means potential increases in tax obligations for affected sellers. https://lnkd.in/gMxQABc4

The Spring Budget: changes to the property industry at a first glance Chancellor Jeremy Hunt unveiled his Spring Budget on Wednesday No more multiple home stamp duty relief Relief for multiple residences was created to encourage private rental sector investment. It was envisaged that a lower stamp duty would encourage landlords to purchase more properties, which they might then lease to long-term renters. Nevertheless, the government has chosen to eliminate this relief after an examination of the current laws shown that it isn't being utilized in this manner. Other anticipated stamp duty changes With the typically high stamp duty tax on top of other moving expenses, the cost of stamp duty can be a significant obstacle for movers. To assist people wishing to relocate, there have been requests for the current stamp duty thresholds—which are scheduled to expire in the spring of 2025—to be made permanent. However, Jeremy Hunt made no such declaration in his statement Wednesday. No more tax breaks for furnished holiday lettings Currently, laws that allow tax benefits for short-term furnished vacation rentals are in effect. Jeremy Hunt declared Wednesday that tax breaks for short-term rentals will end in an effort to increase the supply of long-term rental properties, especially in popular tourist areas where such properties are hard to come by. For taxation reasons, long-term and short-term rentals will now be handled equally. April 2025 is when this legislation is supposed to take effect. Inflation coming down It appears that inflation will reach its objective of 2% in the upcoming quarter, which might be positive news for mortgage rates in the upcoming months. On this, Jeremy Hunt has said: ‘Today’s forecast shows it falling below the 2% target in just a few months' time, nearly a whole year earlier than we announced in the autumn statement.’ #property #budget #chancellor

Spring Budget 2024: Key Changes to Furnished Holiday Lettings and Capital Gains Tax The 2024 Spring Budget introduced several changes, and among them were notable adjustments affecting Furnished Holiday Lettings (#FHL) and Capital Gains Tax (#CGT). In this blog, we’ll explore these changes and provide insights into the tax implications and the potential impact for you > https://bit.ly/3VjTR51 #Brighton #SpringBudget

A client of mine is concerned as she owns a second BTL property and is worried about getting clobbered for tax (that's a technical term btw!) As the Autumn Budget approaches, UK second homeowners are facing a growing wave of uncertainty. With the Chancellor's lips firmly sealed on potential tax changes, the attractiveness of owning a second property is rapidly diminishing. The Double Whammy: Tax Changes and CGT Concerns The recent announcement of the furnished holiday lettings allowance abolition, effective from April 2025, has dealt a significant blow to the financial viability of holiday homes. Coupled with persistent rumors of an impending Capital Gains Tax (CGT) increase, it's no surprise that many second homeowners are re-evaluating their options. Capital Gains Tax: A Potential Storm Brewing The current CGT rates on residential property gains stand at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. However, there's a growing likelihood that these rates could be hiked. One potential scenario involves increasing the higher rate back to 28%, its pre-2024 level. Another possibility is aligning CGT rates with income tax rates, leading to more substantial increases: Basic Rate: From 18% to 20% (up 2%) Higher Rate: From 24% to 40% (up 16%) Additional Rate: From 24% to 45% (up 21%) The Real-World Impact of CGT Increases: To illustrate the potential financial implications, consider a second homeowner who purchased a property in 2012 for £250,000 and sold it today for £375,000. Assuming a current higher rate taxpayer status, the CGT liability under different scenarios would be: Current Rates: £30,000 Increased Higher Rate: £35,000 Aligned with Income Tax Rates: £52,993 The Demise of the Furnished Holiday Lettings Regime For those who have been treating their second home as a furnished holiday letting, the upcoming abolition of this regime will have significant consequences. As of April 2025, owners will lose the benefits of mortgage interest relief, capital allowances, and certain CGT reliefs. Weighing the Costs: Selling vs. Holding The decision of whether to sell or hold onto a second property is complex. While the tax landscape is becoming less favorable, it's essential to consider the potential long-term capital gains and ongoing costs. Maximising Tax Efficiency If you're considering selling, it's crucial to accurately account for all expenses related to the property. This includes improvements, repairs, and any legal fees incurred during ownership. By meticulously documenting these expenses, you can potentially reduce your CGT liability. A Strategic Approach The upcoming Autumn Budget could bring further clarity to the tax landscape. However, it's essential to avoid making hasty decisions based on speculation alone. Consulting with a qualified financial adviser can provide valuable guidance and help you develop a tailored strategy to make a better informed decision. #betterdecisions

How it works: Capital gains tax on the sale of a property When is capital gains tax payable on the sale of property? And at what rate are capital gains taxed? #capitalgains #saleofproperty Capital gains. Even the mention of these two words together can immediately conjure myths about owing the government 50% of the money earned from selling a home. But, like most rumours, it’s only half true—for now. You may have also heard that Budget 2024, the Canadian federal government introduced an increase on certain capital gains. That’s 100% true. For individuals with a capital gain of more than $250,000, they will be taxed on 66.7% of the gain as income—up from the current 50% rate, according to Budget 2024. This inclusion rate change comes into effect on June 25, 2024. Every week, our inbox is full of letters from readers asking how to avoid the capital gains tax. They want to know how to work the system and keep more money in their pockets. Listen, it’s valid to want to hold on to the money earned off of the sale of a secondary residence (cottage, second home) and an investment property. What are capital gains in Canada? Capital gain is the increase in value on any asset or security since the time it was purchased, and it is ‘realized’ when the asset or security is sold.” In the case of this article, the asset we are dealing with is property, which could be a cottage, second home, investment or rental property, as stated above. How are capital gains calculated? How are they taxed? Before we dive into the tax part, let’s go through how to calculate capital gains on the sale of a property. Essentially, this calculation figures out how much the property’s value grew from when you first bought it to the day you sold it. Capital gain = purchase price – selling price We will dive even deeper to reduce the amount of capital gains you would claim on your tax return (more on that below). So, it’s not that capital gains are taxed at a rate of 50%, but it’s that 50% of the capital gains are taxable. At least until June 25, 2024, when that rate changes to 66.7% for gains more than $250,000. And the capital gains tax rate depends on the amount of your income. You add the capital gain to your income for the year, including money you receive from your job, side hustles, dividends in non-registered accounts, any selling of assets and so on. Capital gains are taxed as part of your income on your personal tax return. You will need to figure out the provincial tax bracket rate for your province or territory, too. Since Canada has a tiered tax system, you will have to do a bit of math to estimate your annual income tax, breaking down your total tax into the brackets, and the amount owed for each bracket. Tax rate Tax bracket income 15% Up to $55,867 20.5% $55,868 to $111,733 26% $111,734 to $173,205 29% $173,206 up to $246,752 33% $246,753 or more

𝐆𝐨𝐯𝐞𝐫𝐧𝐦𝐞𝐧𝐭 𝐑𝐞𝐢𝐧𝐭𝐫𝐨𝐝𝐮𝐜𝐞𝐬 𝐈𝐧𝐝𝐞𝐱𝐚𝐭𝐢𝐨𝐧 𝐟𝐨𝐫 𝐋𝐨𝐧𝐠-𝐓𝐞𝐫𝐦 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐆𝐚𝐢𝐧𝐬 𝐨𝐧 𝐑𝐞𝐚𝐥 𝐄𝐬𝐭𝐚𝐭𝐞 Great news for home sellers! The government has reinstated indexation benefits for long-term capital gains on real estate, offering significant relief to those who have held properties for an extended period. 𝐊𝐞𝐲 𝐇𝐢𝐠𝐡𝐥𝐢𝐠𝐡𝐭𝐬 𝐟𝐫𝐨𝐦 𝐭𝐡𝐞 𝐔𝐧𝐢𝐨𝐧 𝐁𝐮𝐝𝐠𝐞𝐭, 𝐉𝐮𝐥𝐲 𝟐𝟑, 𝟐𝟎𝟐𝟒: ➡ Reduced Tax Rates: Long-term capital gains tax rates were cut from 20% to 12.5%. ➡Indexation Benefits Removed: Initially, the indexation benefits were removed, but now they’re back! Despite the changes in the Union Budget, one could have 0 tax liability through reinvestment of capital gains, as the provisions under section 54 for reinvestment in real estate was retained, meaning those reinvesting their capital gains wouldn’t be impacted by the Budget Changes. 𝐈𝐦𝐩𝐚𝐜𝐭 𝐨𝐟 𝐁𝐮𝐝𝐠𝐞𝐭 𝐂𝐡𝐚𝐧𝐠𝐞𝐬 𝐨𝐧 𝐃𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐭 𝐒𝐞𝐠𝐦𝐞𝐧𝐭𝐬: 🏠 Seasoned Real Estate Investors: Those regularly buying and selling properties faced no impact, as they typically reinvest. 🏠 Home Upgraders: End users upgrading their homes also remained unaffected, thanks to the reinvestment clause. 𝐀𝐟𝐟𝐞𝐜𝐭𝐞𝐝 𝐒𝐞𝐠𝐦𝐞𝐧𝐭: 🏠Long-Term Property Owners: The only affected segment were those holding real estate assets for 10-15 years and looking to sell without reinvesting. With the Budget announcements, they faced a significant tax burden due to the removal of indexation. The government has now addressed this by offering two options for calculating long-term capital gains tax: 𝐎𝐏𝐓𝐈𝐎𝐍 𝐀: 12.5% tax rate without indexation. 𝐎𝐏𝐓𝐈𝐎𝐍 𝐁: 20% tax rate with indexation. 𝐂𝐨𝐧𝐝𝐢𝐭𝐢𝐨𝐧𝐬 𝐭𝐨 𝐚𝐯𝐚𝐢𝐥 𝐭𝐡𝐞 𝐚𝐛𝐨𝐯𝐞 𝐨𝐩𝐭𝐢𝐨𝐧: ➡ Applicable only for properties acquired before July 23, 2024. ➡ Available exclusively to individuals and HUFs. This change provides much-needed relief to long-term property owners, allowing them to liquidate assets without the compulsion to reinvest due to tax regulations. Read more about the Budget changes in my previous post: [https://lnkd.in/ghJvEAYc] https://lnkd.in/g7-5YRCR