Posted: 18th January
Are you a property investor? A 3% stamp duty rise is on its way
We’re sorry to be the bearers of bad news, but from April 2016, if you’re a buy-to-let property investor or are buying a second home in England or Wales, you’ll have to pay an extra 3% in stamp duty.
George Osborne made the announcement in his recent Autumn Statement, claiming that the surcharge will raise an extra £1bn for the Treasury by 2021.
He says that the money will be reinvested in communities in places like London and Cornwall, which are being priced out of home ownership.
The changes mean someone purchasing a £275,000 buy-to-let home would see their stamp duty bill rise from £3,750 to £12,000 – nearly three times as much. That’s a big hit if
More than 1.4m people in the UK are landlords and the private rental sector has doubled over the past 10 years, but alarm bells from the Bank of England on the risks to financial stability from booming house prices have prompted the Government to take action, to cool the enthusiasm of a would-be property investor.
The brutal tax crackdown is likely to dash the retirement dreams for millions of middle class families, as they will now need more funds to enter the market, as a bigger chunk of their deposit will be spent on stamp duty.
To make owning a BTL property financially viable, landlords will need to pass on the increased stamp-duty costs to tenants, who will in turn see less money spent on maintaining their property, while rent increases.
In a further blow, investors who own 15 or more properties will NOT have to pay the additional charge.
There is a very real risk that buy-to-let investors could drive prices higher in the short term as they rush to buy before the higher stamp duty takes effect.
Those who have been considering investing in property could now decide to accelerate their plans, which will have the opposite effect over the next few months until April 2016 as investors flood the market as opposed to first-time buyers, driving up house prices in the process.
It is a double whammy for landlords, after the Chancellor cut tax incentives for small landlords in the emergency Summer Budget in July.
From 2017 mortgage interest relief on rental properties will be reduced to the basic rate of income tax only, and the wear and tear costs have replaced with a new system that means landlords can only deduct the exact amount that they incur.
Capital Gains Tax on residential property will have to be paid within 30 days of any taxable house sale from April 2019, which will also make Buy-To-Let investments more difficult for small investors.