What does the UK Budget 2020 have in store for property, both residential and commercial? We caught up with our Head of Private Client Tax and our Head of Construction & Property Incentives Team, Michael Murray for their thoughts.

Residential property taxes

There will be a fundamental change to the payment of capital gains tax (CGT) for those selling or gifting second homes or rental properties situated in the UK after 5 April 2020.  

Where CGT is due, the disposal of a residential property after this date will need to be reported to HM Revenue & Customs within 30 days of conveyance. An estimate of the CGT due will also be payable within the 30-day window with any additional tax payable or repayable dealt with via your Self-Assessment tax return. 

The new reporting requirements will not affect the sale of a person’s main residence, which remains exempt if the person lives in the property throughout their period of ownership, or commercial property where the existing reporting requirements remain in place. 

There will be a significant restriction to lettings relief which can exempt up to £40,000 of capital gain on rental properties that a person has lived in and has also rented out. 

Finally, the current extension to principal private residence relief for the final 18 months of ownership (irrespective of its use) will be reduced from 18 months to nine months from 2020/21. 

Michael Murray - commercial property taxes

With regards to commercial property, the withdrawal of the Enhanced Capital Allowances (ECAs) scheme from April 2020 is at odds with the government’s announcement that it will commit to a net zero carbon emissions target.

While we will continue to encourage investors to specify energy and water efficient technologies when refurbishing or constructing commercial buildings, this may be less likely without the incentive of ECAs.

The government must recognise that a replacement ECA scheme should be made a priority in order to support the commercial property sector in meeting the net zero carbon emission target.

It is widely expected that Structures and Buildings Allowance (SBA) will increase to 3%, however, as this is unlikely to provide a sufficient stimulus on its own, we would hope that the current £1M annual investment allowance (AIA) will be extended from January 2021.