Annual tax on enveloped dwellings used to be something that only applied to a limited number of property owners.
However, a variety of factors have made it much more likely that you’ll now be required to stump up annual tax on enveloped dwellings.
This could impact your bottom line severely. So, it’s worth taking the time to ensure you’ve got a comprehensive understanding of the relevant rules and who’ll be affected.
What do landlords need to know about annual tax on enveloped dwellings?
Coming in to force in 2012, the annual tax on enveloped dwellings was introduced in an attempt to prevent people setting up companies to avoid duties on high-value property purchases.
Until last April, this tax was only applied to properties worth £2m or more. However, the threshold has subsequently been lowered to just £500,000.
An increasing number of landlords have been incorporating their portfolios to mitigate buy-to-let legislative changes in recent times. This, coupled with rising house prices, means many more landlords are now required to make annual payments of:
- £3,500 on properties worth up to £1m
- £7,050 on properties worth up to £2m
- £23,550 on properties worth up to £5m
You could end up with a hefty fine if you don’t realise you’re eligible to pay this tax. These penalties range from £100 for being one day late, to £700 for being one year late.
So, before deciding whether to incorporate your property portfolio, make sure you factor in the new annual tax on enveloped dwellings rules.
Call on 3 Wise Bears for more handy landlord accountancy advice.