Private Buy to Let investors hoping for a quiet afternoon as part of Chancellor George Osborne’s Autumn Statement were in for a rude awakening this afternoon, as he pledged to hike Stamp Duty rates from next year.
Already targeted in July around tax relief on mortgage interest, the Chancellor outlined plans to raise Stamp Duty by 3% above that of residential property, in a swipe at those looking to make profit on additional properties.
“Contractors with surplus funds have traditionally viewed the Buy to Let market as a safe haven for steady returns” said Andy McBride, Business Development Director at Contractor Mortgages Made Easy. “That may well be a thing of the past in the latest set back for property investors from Mr Osborne.”
From April 2016, those in England buying any investment or second properties face a 3% surcharge on each Stamp Duty band, meaning that for properties which attract a 2% duty as residential purchases, the same property would see an investor charged 5%.
Commercial property investors – thought to be those with in excess of 15 properties – are exempt from this levy.
Organisations representing landlords have reacted furiously to this afternoon’s announcement, suggesting that it is a very thinly veiled attempt to wipe out property investment for those who do so on a small scale.
“The Chancellor's political intention is crystal clear; he wants to choke off future investment in private properties to rent” said Richard Lambert, chief executive of the National Landlords Association. "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?”
Landlords will also be hit by a change to Capital Gains Tax rules. From April 2019, they will have to pay any Capital Gains due within 30 days of selling a property, rather than waiting till the end of the tax year, as at present.
In some positive news for the property market, up to £60m of the projected £1bn that is expected to be raised by the change will be put towards helping maintain a recovery in the new build market.
“The equity loan element of Help to Buy has been extended to 2021, a year longer than planned, in addition to those in London gaining access to a potential 40% loan” adds Andy. “There will also be a pilot in five local housing associations to trial the government’s Right to Buy scheme for housing association tenants.”
“It is clear that the Chancellor's tactic is to increase options for an occupation particularly those who need assistance with deposits i.e. first time buyers. If you are looking to make money from residential property it is important that the new tax rules are carefully considered to future proof the viability of any investment.”
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