Catastrophic Blow For The Private Rental Sector!

Chancellor George Osborne landed buy-to-let landlords another shock by announcing a 3 per cent stamp duty surcharge on property purchases from 1 April 2016.

The addition of a 3 per cent extra charge for buy-to-let and second homes on all stamp duty bands above a £40,000 starting level will more than treble the bill for buying a £275,000 home – hiking it from £3,750 to £12,000.

It is important to note that it will not only be Landlords who are affected by this new measure, it also affects people who own one property already (regardless of whether it is their main residence or a buy to let investment) who are looking to acquire a second property. People at risk include those who take a bridging loan to buy a new home before they can sell their previous one, couples moving in together who retain one property while they buy another, or parents buying a “second” home that will not be rented out privately, but lived in by their children while they attend university.

Delivering his Autumn Statement, Osborne said: ‘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 three per cent higher on the purchase of additional properties like buy-to-lets and second homes.’

It is understood that up to £60m of the money raised from the stamp duty surcharge will go to help home-buyers in England in places where holiday homes have forced up local prices. The deadline for responses to the consultation is 1 February 2016, and the final detail of the new policy will be announced at the Budget on 16 March.

The changes follow an announcement in the summer budget that restricts the amount of tax relief landlords can claim on mortgage interest to the basic rate of income tax of 20 per cent, a change being phased in from 2017.
In addition, from April 2019, they will have to pay any CGT due within 30 days of selling a property, rather than waiting till the end of the tax year, as at present.

Responding to the latest changes, Richard Lambert, chief executive of the National Landlords Association said: “The chancellor’s political intention is crystal clear; he wants to choke off future investment in private properties to rent.”

“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”.

To conclude, inevitably the additional 3 per cent will come as a kick in the teeth for landlords who’ve already had to cope with the loss of buy-to-let tax relief, which in some cases has already wiped out their profits. The ultimate goal may be to free up more housing for first-time buyers, but the short term effect may just be rent hikes for those currently renting – or less well-off landlords having to sell up. At this stage we can only speculate about its form and extent, however we would hope that the consultation process will result in relief for the acquisition of a genuine main residence.

Stacey Lakeland

About Stacey Lakeland

Stacey Lakeland is a Solicitor within the Commercial Property department at Forbes Solicitors. Stacey’s blogs cover general property matters relating to both residential and commercial property matters such as updates to legislation affecting the property sector, landlord and tenant matters, topics which relate to the construction and development sector and also issues relating to property disposals and acquisitions, to name a few.
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