Why the Land Registry’s sell-off has been put on hold but landlords face paying more tax on the profit made from selling an investment property
Two pieces of new legislation making their way through parliament appear likely to have a significant impact on vendors and buyers in central London.
The government has put its plans to privatise the Land Registry on hold but it has inserted amendments into the Finance Bill that means landlords in central London could fall into an income tax trap when selling a rental property.
The changes to the Finance Bill, which is due to go before the House of Lords before the end of the year, mean profits from the sale of second homes in central London
will become liable for income tax rather than capital gains tax as at present.
When it comes to investment property sales, CGT is charged at 18% for basic rate taxpayers and 28% for higher rate taxpayers. Income tax rates, on the other hand, are currently 40% for anyone earning more than £43,000 a year and 45% for the highest earners.
All property buyers and sellers in Knightsbridge, Marble Arch and other areas of central London, however, will benefit from the Land Registry remaining public property.
The Land Registry was due to be sold off as part of a strategy drawn up by former Chancellor George Osborne to raise £5bn by 2020.
Details of the sale were expected to be included in the Neighbourhood Planning and Infrastructure Bill, which was launched in Parliament in September.
A government source explained why there is no mention of the Land Registry’s future ownership in the Bill: “No decision has been taken on the future of the Land Registry. A consultation on the Land Registry’s future closed in May and we are carefully considering our response. It is only right that new ministers take time to look at all their options before making a decision.”
Opponents of the Land Registry’s sale point out that the consultation failed set out a framework for customer complaints or how any new owner would be held accountable for errors because the creation of a Land Registry Ombudsman was ruled out.
What does the Land Registry do?
Although the registry is part of the Department for Business, Energy and Industrial Strategy, it operates as an executive agency and a trading fund. This means it is self-financing because its running costs are covered by the fees paid by users.
In 2014/15 alone, the Land Registry cost almost £261m to run, but it generated £297m of revenue.
How? The Land Registry keeps the official record of commercial and residential land ownership in England and Wales, holding 24 million titles for properties. Data is available to the public via searches at £3 each, and used by other organisations to provide a range of services including the UK House Price Index.
Anyone buying or selling land or property, or taking out a mortgage, must apply to register…
• Unregistered land or property;
• Any new owner of registered land or property;
• An interest affecting registered land or property, such as a mortgage, a lease or a right of way.
Property owners in Knightsbridge, Marble Arch or other part of central London whose house, flat or commercial premises is not registered can make voluntary applications for registration. The advantage of this is it gives owners some protection against squatters as well as avoiding the need to produce old documents each time a property changes hands.
For more information on the value of property in central London, contact Plaza Estates