Our property tax jargon buster, from stamp duty to capital gains

Oct 14, 2020

When you spend all day, every day, thinking about property tax, in an office full of property tax specialists, it’s easy to get lost in your own language.

From CGT to SPV, from Form 17 to IHT, the way we talk to each other would sound like absolute nonsense to an outsider at times.

For us, it serves a purpose: it means we can work quickly and efficiently, with complete clarity.

Precision is really important in accounting and some of the professional language we use allows us to achieve that without having to recite long paragraphs of government guidance.

It’s a shortcut.

The problem is when you catch yourself using it with people outside your bubble – and especially clients.

Speaking to landlords in plain English

We pride ourselves on giving landlords an education in property tax. After a year or so working with us, you’ll know more about the business of being a landlord than… well, a lot of non-specialist accountants!

Many of our clients are completely new to letting property, though, having just acquired their first rental flat or house as a result of inheritance or moving in with a partner.

That’s why we all try so hard to speak in plain English, to make clients feel comfortable asking questions and to encourage people to call us out.

Seriously, if you’re talking to me or one of my colleagues and we use a bit of jargon you don’t recognise or understand – ask us to explain it. Keep us to our pledge to be the clearest communicators in the game.

What you’ll find below is a list of some common terms that come up when we’re talking to landlords about property tax, with a brief explanation of each.

You’ll know some of this already, especially if you’ve been working with us for a while, but there might be others you’ve been scratching your head over.

This is just about the language, though, and for fuller information on the principles and application of UK property tax law, check out our complete guide.

What’s ATED? What’s an SPV? What’s Form 17?

ATED – annual tax on enveloped dwellings.  An annual tax payable by companies and some partnerships which own UK residential property worth more than £500,000.

CGT – capital gains tax. A tax on the profit you make when you sell an asset, such as a flat or house, that’s increased in value. It’s the gain that’s taxed above an annual tax-free exemption, not the overall payment you receive.

Finance cost relief – or mortgage interest relief. Before 2017, this relief allowed buy-to-let landlords to deduct all of their finance costs, including mortgage interest, from their profits before tax. This was gradually restricted for individuals, and as of 2020/21 all finance costs are given as a basic-rate tax reduction instead. This has been much more costly for some landlords.

Form 17 – used to declare beneficial interests in joint property and income to HMRC. If you live with a spouse or civil partner and have income from jointly-owned property, you’ll generally be taxed on a 50/50 split of the income. Complete form 17 if you want to register a different, more accurate split of income.

HMO – house of multiple occupancy. A single house with several individual tenants – a student let, for example. Not a tax term but one you’ll hear a lot in conversations about rental property.

IHT – inheritance tax. A tax on the estate of someone who has died, which includes any property they owned.

LBTT – land and building transaction tax. Essentially the Scottish equivalent of SDLT, payable on the purchase of property worth more than £145,000. (See below.)

Letting relief. Relief on CGT if you let out part of your main home and live there at the same time as your tenants.

LTT – land transaction tax. Tax on the purchase of property in Wales, similar to LBTT and SDLT.

NRB – nil-rate band. A threshold below which no inheritance tax is due on an estate after it is passed on.

NRCGT – non-resident capital gains tax. Capital gains tax (see above) as applied to the disposal of UK assets, such as property, owned by people not resident in this country.

PRR – private residence relief. Tax relief on a property that has for some time during the period been your principal private residence. That is, your home.

RNRB – residence nil-rate band. An additional NRB that applies to family homes left to direct descendants which can reduce inheritance tax bills.

SPV – special purpose vehicle. A type of limited company set up to fulfil a specific purpose, such as the buying and letting of properties. Rental profits on property owned through an SPV are subject to corporation tax.

SDLT – stamp duty land tax. Paid on the purchase of property or land above a certain value in England and Northern Ireland. Sometimes imprecisely called just ‘stamp duty’, which is a general term that also covers stamp duty reserve tax (SDRT) on the transfer of stocks and shares.

TNRB – transferable nil-rate band. If one spouse or civil partner dies and the amount of their estate liable to inheritance tax doesn’t use up all of the nil-rate band, the unused part can now be transferred to the survivor.

Still puzzled?

If you’re still confused by anything above, pick up the phone or send us an email – you know we’ll be pleased to hear from you.

Related blog posts

Got a question for our landlord tax experts?

If there’s a property tax issue that has you puzzled or worried, get in touch. Everyone on our team loves to talk, especially when it helps people like you find peace of mind.