Are Homeowners Staying Up To Speed With Tax Liability?
This blog is written with credits to an Accountancy Daily article.
New laws surrounding the Principal Private Residence (PPR) and capital gains tax have recently changed and HUSA Accountants want to make sure you are all up to date on the changes in the law and offer our advice on your financial planning, to reduce the impact of residential properties on taxes.
Principle Private Residence
Tax laws can be complex and subject to frequent changes, so it can be challenging for homeowners to keep up with all the details. Many homeowners seek assistance from tax professionals to ensure they accurately report their income and take advantage of any applicable deductions. HUSA Accountants wants to support homeowners with tax advice and with recent changes to the PPR law, we want to make sure you’re aware and help where we can.
Additionally, various resources are available to help homeowners understand their tax liability. HMRC provides publications, forms, and online resources that offer guidance on homeownership-related tax matters.
In the UK, PPR relief allows individuals to avoid paying CGT on any gains made when selling their main residence, if certain conditions are met. These conditions typically include.
- Ownership and occupation: The property must have been the individual’s main residence for at least part of the time they owned it. In most cases, this means it was their main home, although certain periods of absence, such as due to work, can be allowed.
- Size of the property: The relief usually applies to the main residence and its surrounding garden or grounds up to a specified size. Larger areas may qualify for relief if they are required for the reasonable enjoyment of the property.
- Other properties: PPR relief typically only applies to one main residence at a time. If an individual owns multiple properties, they must declare which one qualifies for the relief.
Considering Inheritance Tax
The purpose of inheritance tax is to generate revenue for the government and to promote wealth distribution. It is often considered a form of wealth redistribution, as it targets the transfer of assets from the wealthy to the next generation or beneficiaries.
The tax is usually paid by the estate of the deceased person before the assets are distributed to the heirs or beneficiaries. The tax rate and exemption thresholds can vary based on factors such as the relationship between the deceased and the beneficiary, the value of the estate, and any applicable deductions or exemptions.
As of 2020, the residential nil rate band increased to £175,000 and any unused proportion of this can go to a surviving spouse or partner and is set against the total estate. However, this residential nil rate balance is only available upon death, unlike the nil rate balance laws before. This inheritance must go to a direct descendant too.
For information on Tax inheritance, get in touch with HUSA accountants today!
Stamp Duty
You may be required to pay a one-time tax called Stamp Duty Land Tax (SDLT) when you purchase real estate buildings worth more than £125,000 (or £40,000 for second residences). Unless the home costs more than £300,000, first-time purchasers are exempt from SDLT; in that case, they must pay tax on the excess amount up to a maximum of £200,000. Purchasing a residential property can also mean paying for stamp duty land tax (SDLT).
At HUSA Accountants, we can make this complicated topic more understandable, and help you with your property taxes. We can work with you to ensure your finances are correct and organised during the process of buying a home or putting plans in place for the future. Reach out to us today.
