BUYING AND SELLING REAL ESTATE IN ENGLAND AND WALES 107
using a formula that takes into account various factors, including the fact that rents to be received in the future have a lower value than rents received immediately. o For commercial leases, where the net present value exceeds £5m, the rate of SDLT for the proportion of the net present value above £5m is 2% rather than 1% o A 17% SDLT rate applies to the entire purchase price when residential real estate costing more than £500,000 is acquired by certain “non-natural persons” ( NNP s). These include companies and partnerships with a corporate partner but not trustees. Relief from the 17% charge (with the effect that the normal rates apply) may be claimed by NNPs carrying on real estate development or using real estate for commercial renting to third parties. Conditions apply. • In Wales, land transaction tax ( LTT ) is payable instead of SDLT. The two taxes (and the reliefs that apply) are broadly similar but there are some technical differences and also differences in the rates of tax that apply: o For commercial real estate, the
remaining amount. Purchases of additional residential real estate (or purchases of residential real estate by companies) attract higher rates (and payable at different thresholds) up to a maximum of 17% on any portion of the purchase price that exceeds £1.5m. There is no first- time buyer’s relief in Wales. o With regard to commercial (but not residential) leases, a 1% rate of LTT is applied to the net present value of the rent above £225,000. Where the net present value exceeds £2m, the rate of LTT for the proportion of the net present value above £2m is 2% rather than 1%. o Unlike in England, NNPs of residential real estate do not pay an enhanced rate of LTT.
• Annual Tax on Enveloped Dwellings ( ATED ) came into effect on 1 April 2013 and is currently payable only in respect of residential properties owned by NNPs worth in excess of £500,000 on 1 April 2022 (or at acquisition if later). ATED is an annual charge of up to £292,350 per year (as at ATED tax year 25/26), calculated by reference to real estate value bands. Rates increase in line with the Consumer Prices Index each year. Relief may be claimed by NNPs carrying on real estate development or using real estate for commercial renting to third parties, commercial trade purposes or as employee accommodation. Conditions apply. • For interests in UK land (residential or commercial) owned by individuals or trustees, capital gains tax ( CGT ) or non- resident capital gains tax ( NRCGT ) may be
rate of tax is 0% on the first £225,000 of the purchase price, 1% on the next £25,000, 5% on the next £750,000 and 6% on the remaining amount. o For residential real estate, the rates are 0% on the first £225,000 of the purchase price, 6% on the next £175,000, 7.5% on the next £350,000; 10% on the next £750,000 and 12% on the
ILN Real Estate Group – Buying and Selling Real Estate Series
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