BTL homes hit with increased stamp duty

In the Autumn Statement yesterday, Chancellor Osborne announced that the government is to increase stamp duty on buy-to-let properties and second homes by 3%. This is to become effective at the start of the new tax year in April 2016.

Osborne said that, ‘more and more homes are being bought as buy-to-lets or second homes.’ He feels that many of these are bought by cash transactions that are not affected by the restrictions introduced in the Budget earlier this year.[1]

Affordability

‘Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy. So I am introducing new rates of Stamp Duty that will be 3 per cent higher on the purchase of additional properties like buy-to-lets and second homes. It will be introduced from April next year and we’ll consult on the details so that corporate property development isn’t affected,’ the Chancellor added.[1]

The stamp duty surcharge will raise each band by 3%. This means that for properties valued between £125,000 and £250,000, where stamp duty is 2%, buy-to-let landlords will have to pay 5%.

Further important information for landlords comes with the news that for the average buy-to-let purchase costing £184,000, they will have to pay a further £5,520 from April 2016.

There was good news for commercial property investors with 15 or more properties, who are thought to be exempt from the new charges. In addition, Mr Osborne has pledged to fund an extended Help to Buy scheme in London, alongside more money for the Starter Homes programme.

BTL homes hit with increased stamp duty

Capital Pains

In further alterations, buy-to-let landlords will be hit in the pocket by changes to the Capital Gains Tax. From April 2019, they will be permitted to pay any outstanding Capital Gains Tax within 30 days of selling a property, as opposed to waiting until the end of the tax year as the current rules permit.

Landlords are already set to get a lower rate of tax relief on mortgage fees. In this year’s Budget, the chancellor outlined plans for landlords to only receive the basic rate of tax relief (20%) on mortgage payments. This will be phased in from 2017.

Richard Lambert, CEO of the National Landlords Association, believes, ‘the Chancellor’s political intention is crystal clear, he wants to choke off future investment in private properties to rent.’ [1]

‘If it’s the Chancellor’s intention to completely eradicate buy-to-let in the UK then it’s a mystery to us why he doesn’t just come out and say so,’ he added.[1]

Where the money is going

Up to £60m of the funds raised by the stamp duty surcharge will assist home-buyers in England in locations where holiday homes have led to an increase in local prices.

In addition, the Help to Buy scheme will be extended to 2021, a year more than first planned. What’s more, an extension to the scheme in the capital will see purchasers who can raise a 5% deposit given a loan worth up to 40% of the property. This loan will be interest free for 5 years.

The existing maximum loan is for 20% of the property’s value elsewhere in the country.

In total, the Government has pledged to put an extra £6.9bn into housing in England. This includes an extra £2.3bn in loans for the government starter homes programme and £4bn given to housing associations and local authorities to build more houses for shared ownership.

A further £200m will be utilised to build homes for rent, with the aim to allow tenants to save for a deposit.

[1] http://www.propertyreporter.co.uk/hero/btl-and-second-homes-to-be-hit-by-3-rise-in-stamp-duty.html