Buy-to-let landlords and people buying second homes will soon have to pay more in stamp duty. Here partner at WHN, Graham Ireland, explains the changes and potential impact on the property market.
From April 2016, those in England and Wales will have to pay a 3 per cent surcharge on each stamp duty band. It means the tax bill on a buy-to-let property costing £250,000 will jump from £2,500 to £10,000.
Stamp Duty Land Tax is to be paid irrespective of the purchase price of the property. At present, it is not payable if the purchase price is less than £125,000 but the announcement indicates that it will also be payable on transactions under £125,000 at the 3 per cent starting rate.
The additional stamp duty will not apply to caravans, mobile homes or houseboats. Mr Osborne said the property tax would raise almost £1bn by 2021, which will help fund the construction of new homes.
However, the requirement to pay an enhanced amount of stamp duty puts huge pressure on investors and landlords and as a result an adverse effect on the property market. While some investors will race to add properties to their portfolio before April, the changes could deter new landlords from entering the market, pushing the gap between a dwindling supply of available property and growing demand.
This is the second major recent change for landlords. Only recently, regulations were put in place requiring landlords to check their tenants’ immigration status, the sanction being criminal prosecution for failing to do so.
In addition, if landlords want to obtain possession at the end of a tenancy term, they must have provided the tenant with a set of documents at the beginning of the tenancy which is yet another administrative burden.
Landlords should also be aware that there is likely to be a further rule change announced next year with regard to Capital Gains Tax relief.
To discover more and speak to one of our expert team please call Graham Ireland on 01254 272640 or email graham.ireland@whnsolicitors.co.uk
