The new financial year has started with a shake up to stamp duty for buy-to-let investors and people buying more then one property.
In November 2015, George Osborne, the chancellor, first
announced that changes to the current stamp duty paid on second homes or buy-to-let properties would incur a 3% surcharge. This sent shock waves to buy-to-let investors, who rushed to buy properties before the implementation, on 1st April 2016. For landlords, estate agents and solicitors, the days and weeks leading up to the deadline have been some of the busiest in living memory, as parties rushed to complete property deals before the increase came into force.
Currently, first time buyers pay no stamp duty on the first £125,000 of any transaction, then 2% on transactions between £125,000 and £250,000 and 5% from any transaction exceeding £250,000 and up to £500,000.
The surcharge applies to anyone buying a buy-to-let property or an additional property with a value exceeding £40,000. The extra stamp duty can add thousands of pounds to a purchase which has put off some investors.
For example, a property sold for £250,000, before 1 April would accrue £2,500 of stamp duty and from now on, that figure will increase to £10,000.
If however you buy a second home and within 3 years sell your current home you may be entitled to a refund to the extra stamp duty you paid.
The cost of the government’s new measures will fall heavily on buy-to-let investors, who choose this investment option to increase their pension pot or supplement their income. The new Stamp Duty surcharge stands to provide significant
revenues for the treasury, capitalizing on the increased number of private landlords investing in a second property or expanding their property portfolio.
Landlords are facing a further squeeze under restrictions to
mortgage tax relief, due to come into force next year, while the Bank of England has also announced that they aim to tighten restrictions around buy-to-let-lending. These changes will make lenders look into a landlord’s wider finances and not just consider the landlord’s rental income.
According to the Association of Residential Letting Agents, nearly 40% of the letting agents predict that the supply of buy-to-let properties will fall from 1 April 2016, while many of the organisations’ members believing the cost will be passed onto tenants with an increase in rents.
Whether you have a portfolio of buy-to-let properties,
holiday homes or simply want to buy and sell a property please contact:
Shazad Butt on 01284 755771 or
email: shazad.butt@rudlings-wakelam.co.uk