The Chancellor mentioned REITs in the Budget and this seemed to have a positive effect on property shares. What are REITs?
Real Estate Investment Trusts, or REITs (pronounced reets) are already popular in other countries such as the US and Japan . REITs pool investors’ assets and buy a portfolio of properties, which are then let to individuals or companies. The REITs themselves will be normal shares and so give investors access to property movements with a couple of important differences from where we are today. At present, dividends from shares in property companies have the basic rate of tax deducted, which is not reclaimable. In REITs however, whilst the basic rate will be deducted (and topped up to the higher rate if applicable) this can be reclaimed if the investment is in an ISA or a pension. For the companies themselves, they will be free from Corporation Tax providing that they distribute 90% of their profits to investors. There will be a 2% charge to switch to REIT status both of these figures were expected to be much higher, so this news was well received and some property shares jumped 10% on th
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