Nationwide deposit protection & Wealth Tax update

Posted: 06/06/2012

England and Wales are set to introduce a scheme where landlords will face compulsory deposit protection systems on the 2nd of July, with Scotland looking likely to join in.

The Scottish Government approved two out of three of the protection schemes relating to letting agents and landlords. The scheme is to protect deposits in the private rented sector and it’s estimated that Scottish deposits total to £74 million a year with 273,000 tenants.

Unfortunately, it is also estimated that £3.6 million of Scottish deposits are wrongly withheld when tenants leave their privately rented homes.

The protection scheme involves three approved proposals for Scotland, the first being a Letting Protection Service, the second is the Mydeposits Scotland and the third is the SafeDeposits Scotland.

The tenancy deposit protection also applies to landlords that let property in Scotland but do not live there. The scheme is aimed to eliminate the landlords that are exploiting trusting tenants in the private sector by wrongly withholding their deposits.

The proposed Wealth Tax, which was discussed by the Government on Budget Day, the 21st March, as part of the Budget Proposals is still under debate, with the Government only just issuing a consultation.

The Wealth Tax includes two proposals, the first being an annual tax on houses worth £2 million and over which are owned by ‘non natural persons’ such as companies in the UK, as well as those off shore. The second proposal involves extending the Capital Gains Tax for properties owned by ‘non natural persons’.

Properties bought for over £2 million by a ‘non natural person’, are already charged 15% Stamp Duty Land Tax, which came into effect immediately on Budget Day.

These proposals have raised major concerns in the London property market, with companies putting new purchases on hold.

The reason why the Government want to introduce the new taxes is to try and prevent companies gaining tax advances on residential property.

The proposed annual charge on properties in 2012 to 2013 would be;

Property worth £2-£5 million would be charged £15,000
Property worth £5-£10 million would be charged £35,000
Property worth £10-20 million would be charged £70,000
Property worth more than £20 million would be charged £140,000

This would mean that properties would have to be valued or self assessed every 5 years to ensure that the correct tax is charged.

The Treasury have already received a high number of complains about the proposals as the plans could have a dramatic impact on the competitiveness of the London property market.

What are your thoughts on the latest Government scheme that will affect landlords and the update to the Wealth Tax proposal?

Amanda McGovern, Pali Ltd

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(0) Comments Governmant, landlord, Stamp Duty, tax, tenant

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